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redemption of Preference Shares

Malav Shah (Company Secretary and AVP Legal) (171 Points)

17 April 2010

Dear Professionals

Need your views on this.

A, a pvt ltd company have issued redeemable preference shares of Rs. 100 each (issued at par). A have reserves equivalent to 70% of redemption amount and willing to redeem the shares at discount i.e at 30% discount. The preference shareholder have also agreed to accept as full and final settlement.

my query is can A redeem preference shares at discount? If yes how this can be done?

regards
Malav

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4 Replies

CS Jithesh (ACS,) (COMPANY SECRETARY ) (485 Points)
Replied 17 April 2010

The redemption terms and conditions will done accordance to the terms and conditions of the share application form through whch the pref shares are raised. If you want to change the terms and condition, you can pass the same in an EGM stating that the same will be redeemend with 30% discount. The terms of discount and change should be passed in the EGM as special resolution.

Once the resolution is passed as Special, you have to file Form 23 for registering the resolution.

Once the terms are finalised in the EGM with 3/4th of majority, you can redeem the prefeence shares at a discount.

This is my view, kindly rectify if I am wrong :)

Regards

CS Jithesh

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Jagruti (CS) (Service) (1953 Points)
Replied 17 April 2010

As per Section 80, Preference can be redeemed as per Articles of the Company and terms of redeemption if any. Thus check if articles so provide and get the approval of Prefernce share holder for redeemption of shares at discount.