24 July 2013
Here is a query A newly formed company wants to issue cumulative preference share The divided will be paid as equity shares can the dividend be converted into equity shares in case there is no profit in the company and reserves are also negative.
do we need to show dividend payable every year or only at the time of conversion
24 July 2013
Requirement for redemption of shares:
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.
Cumulative preference shares.—In the case of cumulative preference shares, the shareholders are entitled to receive the dividend for a year which could not be paid due to losses or inadequate profits in the subsequent year(s) whenever there are sufficient profit.
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