Issue of preference shares by private limited company

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Querist : Anonymous

Querist : Anonymous (Querist)

08 August 2012 There is a private limited company with authorised capital of rupees 1 lac only. now the directors want to privately place preference shares of rupees 50 lacs and the same has been authorised in the company's articles as well.
can u please tell me what shall be the prerequisites and the procedure for private placement of these preference shares. Also is there any min or max limit on rate of interest? Also is it necessary for the company to pay interest on these shares annually?

vignesh

vignesh (Expert)
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11 August 2012 Hi,

First of all the authorised share capital of the company should be increased, so as to enable the company to issue the preference shares. The preference share holders are also a member of the company. Thus the total no. of members in a pvt company does not exceed 50. After increased the authorised share capital, the board can issue the pref shares as the terms and conditions fixed by the board of directors. The pref shares have to be serviced by dividend only and no any interest carry on. being a private company the placement of pref shares is done through board itself.

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