conversion from cumulative pref shares to noncumulative pref

 The provisions of Companies Act provides that the arrears of cumulative dividend has to be paid before equity dividend is paid. Since the company is a loss making, it is obvious that no equity dividend will be declared. Thus, there is no existing liability w.r.t. arrears of dividend.

You can convert the existing shares into non cumulative only after passing a special resolution at the meeting of the preference shareholders and if the MOA and AOA allow. Yoy can propose to convert the principal+arrears of dividend into new non cumulative shares. This will put the pref shares in advantageous position.

Mr Pan Jain

Thanks for the reply-Can you clarify the following issues-

a)100000(8%)  Redeemable cumulative preference shares are issued in Feb, 2009-Now can we convert into noncumulative preference shares-Can we convert 100000 shares into noncumulative-or we have to take dividend from feb, 2009 to june,2009 and issue noncumulative for shares+dividend

b)MOA and AOA are silent regarding the conversion-Still the shares can be converted with Preference shareholders approval

c)Any approval is required by Equity shareholders in their general meeting

pl clarify

regards

Joseph David

 1. Hold the meeting of preference shareholders and get the proposal approved by passing a special resolution. Alternatively, obtain consent in writing of not less than 3/4th of preference shareholders. Whether the shares has to be converted at face value or including arrears of dividend will depend on approval of shareholders. If they approve to conversion without dividend, you can proceed further.