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Premium on redemption of preference shares

MCA 1064 views 1 replies

Rajneet

Manager

34 Points Joined January 2011

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

Replies (1)

P C Agrawal

Registered independent director Past Ch

8229 Points Joined March 2007

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.