waiver of Dividend of preference share

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 May 2010 A company issue cumulative redeemable preference share and after some years by proper processing made the changes in the term of issue to non cumulative preference share and extend the period of maturity. Matter has already been filed with ROC. So due to inadequacy of profit company is not able to pay out the cumulative dividend to preference share holder. Can company waive the accumulated dividend & right to claim such dividend after getting a consent letter from Preference share holder? if yes please mention the process.The said company is private limited company

Rasesh

Rasesh (Expert)
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26 May 2010 If the preference shareholder waives the accmulated unpaid dividend by way of a board resolution, then it is possible. The company issuing the preference shareholder can take note of the same and reflect it accordingly in their books of accounts. Accumulated Unpaid Dividend is shown in contingent liabilities and this amount would get reduced to the extent of the dividend waived.