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Premium on redemption of preference shares

Rajneet (Manager) (34 Points)

12 July 2013

Dear Friends,

Need your advice with relevant provisions on a query. If a company had issued preference shares at par which would be redeemed at premium, and the company doesnt have any profits and securities premium account on expiry of their term, can the company redeem the shares at par because it doesnt have any profits or securities premium account or is it mandatory for the company to pay premium on redemption as agreed and arrange either profits or securities premium account at the time of redemption.

Request your advice and relevant provisions.

Thanks

Raj

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1 Replies

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 21 July 2013

1. As per the terms of the issue, shares have to be redeemed at premium. However, these terms can be changed to provide for redemption at par by passing resolution u/s 106. 2. As per section 80, shares have to be redeemed out of profits or out of fresh issue. CRR has to be created in case shares are not redeemed out of fresh issue.