Yes. a company can redeem pref. shares out of fresh issue.
Following are the provisions to that effect:
Section 80(1) provides conditions for redemption of preference share which has to be complied with by a company
(1) The preference shares shall be redeemed out of profits of the company which would otherwise be available for distribution as dividend or out of the proceeds of a fresh issue of shares made for the purpose of redemption. (2) Only fully paid preference shares shall be redeemed. (3) The premium, if any, payable on redemption shall be provided out of profits or out of the company's security premium account, before the shares are redeemed. (4) Where any preference shares are redeemed out of profits, a sum equivalent to the nominal value of the shares redeemed shall be transferred to the capital redemption reserve fund.
Board Resolution for redemption of Preference Shares
RESOLVED THAT pursuant to the provisions of section 80 of the Companies Act, 1956 ................Cumulative Redeemable Preference Shares of Rs 100 each aggregating to Rs ...........be redeemed out of frsh issue of shares.........................the due date of redemption, by surrender of shares by the shareholders thereof.
RESOLVED FURTHER THAT the Register of members relating to ...............Cumulative Redeemable Preference Shares of Rs 100 each and the Share Transfer books be closed from _______ to _______ (both days inclusive) and the notice thereof be duly given by the Company Secretary to the stock exchanges and in the newspaper by way of an advertisement.
Specimen of notice to be published in newspaper for proposed redemption of preference shares
Notice is hereby given that the company will redeem .................Redeemable Cumulative Preference Shares on ............. Shareholders are requested to deposit their share certificates in respect of these shares on or before ................. at the registered office of the company at ............... to enable the company to make the payment in respect thereof. The Share Transfer Register in respect of ...............redeemable cumulative preference shares and the register of members will remain closed from ................. to ................... (both days inclusive) for the aforesaid purpose. Notices have already been forwarded to the shareholders individually. By Order of the Board For ABC Ltd. Company Secretary
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