Chapter IV - Share Capital and Debentures
Section 65
Section 65: reserve share capital when an unlimited company becomes limited
An unlimited company having a share capital may, by its resolution for registration as a limited company, create reserve share capital that can be called up only in the event of, and for the purposes of, winding up.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
An unlimited company having a share capital may, by a resolution for registration as a limited company under this Act, do either or both of the following things, namely— (a) increase the nominal amount of its share capital by increasing the nominal amount of each of its shares, subject to the condition that no part of the increased capital shall be capable of being called up except in the event and for the purposes of the company being wound up; (b) provide that a specified portion of its uncalled share capital shall not be capable of being called up except in the event and for the purposes of the company being wound up.
Introduction
Section 65 gives creditors a cushion when members of an unlimited company move to limited liability. The company may increase the nominal amount of its shares or set aside a portion of uncalled capital. Either way, the reserved amount is callable only on winding up.
Conversion itself is governed by section 18 (conversion of companies already registered). Section 65 came into force on 12 September 2013 under S.O. 2754(E). The consolidated text shows no amendment.
Key takeaways
Who
An unlimited company having a share capital.
When
By the resolution for registration as a limited company.
How
Increase the nominal amount of each share, or reserve a specified portion of uncalled capital, or both. The reserved amount is callable only on winding up.
Confirm applicability
Section 65 applies to an unlimited company having a share capital that is passing a resolution for registration as a limited company. The conversion procedure is in section 18.
Choose the reserve mechanism
Under clause (a), the company increases the nominal amount of its share capital by increasing the nominal amount of each share, on condition that no part of the increase is callable except on winding up. Under clause (b), it provides that a specified portion of its uncalled share capital is not callable except on winding up. It may do either or both.
Practical preparation
Confirm that the company has share capital. Decide whether to use clause (a), clause (b) or both. Include the provision in the resolution for registration as limited. Record the reserve in the capital records.
Practical checklist
Do
- Draft the reserve provision in the same resolution for registration as a limited company.
Avoid
- Do not treat reserve capital as callable for ordinary business needs.
Illustrative example
Hypothetical: family unlimited company converts
An unlimited company with partly paid shares resolves to register as a limited company.
Reserve
It provides that the uncalled portion is callable only on winding up (clause (b)).
Convert
It follows section 18 for registration as limited.
Record
It records the reserve capital.
Outcome
- Creditors retain recourse to the reserved uncalled capital on winding up.
Glossary
- Reserve share capital
- Share capital that can be called up only in the event and for the purposes of winding up.
- Unlimited company
- A company whose members’ liability is not limited.
Frequently asked questions
Is reserve capital mandatory on conversion?
No. Section 65 says the company "may" do either or both things.
Can the reserved amount be called to fund operations?
No. It is callable only in the event and for the purposes of the company being wound up.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026