It is available only for the creditors on winding up of the company.

Reserve capital is that portion of the uncalled capital which a company reserves to be called up only at the time of winding up of the company. This is done through a special resolution passed by the company.

To understand this better, consider the share capital structure:

When shares are issued, they may be:

• Fully paid (entire amount called and paid)
• Partly paid (only partial amount called, rest remains uncalled)

For partly paid shares, the uncalled capital can be:

1. Uncalled capital - Can be called during normal course of business
2. Reserve capital - Can be called only when company is winding up

The key distinction is that reserve capital is permanently reserved for creditors. The company cannot call up this amount during its normal operations, even if it faces financial difficulties. This acts as a security for creditors because they know this amount will be available to settle their claims when the company is liquidated.

For example, if a company issues 10,000 shares of ₹100 each with ₹60 called up, the remaining ₹40 per share (₹4,00,000) is uncalled capital. The company may pass a special resolution to convert ₹20 per share (₹2,00,000) into reserve capital. This ₹2,00,000 now becomes available exclusively for creditors on winding up.