A closelyheld loss making company has issued cumulative preference shares by passing in the EGM in the year 2008 to their group company. The terms of issue is to be redeemed within 36 months.
The company will not get profits for the next 5 years to declare preference dividend or no fund to redeem within 3 years.
After 3 years from fresh issue the existing cumulative preference shares can be redeemed-
Since it is cumulative preference shares how to pay dividend at the time of redemption? Since there are no profits it cannot declare dividend from reserves?
Can it pass resolution in EGM in the current year by changing from cumulative preference shares to noncumulative preference shares?
What is the producedure to follow for conversion of cumulative preference shares to noncumulative preference shares?
Thanks in advance
Joseph David
CAclubindia
