Reg:redemption of preference shares

pahuja (C.A Final Student ) (472 Points)
Replied 06 September 2011

Hi Priyay

Find the attachement related to your qurery , I think this may help you to solve out your query.

Thank and Regards

Suraj Pahuja

Attached File : 612943 823341 redemption of pref shares procedure.pdf downloaded: 1911 times

1 Like

Priya Sharma (Company Secretary & Student.MBA) (998 Points)
Replied 06 September 2011

The section says that the redeemable preference shares can be redeemed out of proceeds of fresh issue of shares, my query is:

1) is it necessary to issue fresh shares equal to the nominal amount of the shares to be redeemed or fresh issue can e lesser than the amount of the shares to be redeemed.? I think fresh issue can be lesser than the amount to be redeemed, with the approval of the preference shareholders.

2) As the section has prescribed fresh issue of shares for the purpose of redemption of redeemable preference shares, do we need to file Form 2 for such further issues.?

3) kindly provide the step by step procedure for the redemption.

Regards

Priya

pahuja (C.A Final Student ) (472 Points)
Replied 06 September 2011

The procedure for redemption are as below:
1. Hold a Board meeting for passing resolution for further issue of shares for the purpose of redemption.
2. In the same Board meeting pass another resolution for redemption of PS.
3. Please note that the amount to be raised by issue of fresh shares shall be only limited to the amount of the nominal value of the PS to be redeemed.
4. Filing of Form 5 (for redemption and Form 2 for allotment of shares)
5. Assumption is made that the company is question is an unlisted company.
6. Assumption is made that the further issue of shares will be within the Authorised Capital of the company.

Please note if any of the two assumptions changes then the procedure to be suitably modified.

Priya Sharma (Company Secretary & Student.MBA) (998 Points)
Replied 07 September 2011

The AOA of the Company says

“Subject to the provisions of the Act, any preference shares may, with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the Company, are liable, to be redeemed on such terms and in such manner as the Company, before the issue of the shares as may, be special resolution determine."

My query is do we need to conduct General Meeting and then pass special resolution?

Regards

Priya Sharma (Company Secretary & Student.MBA) (998 Points)
Replied 07 September 2011

Will the action of issuing new shares for the purpose of redemption of existing preference shares fall under the net of section 81(1A) of the Act?

pahuja (C.A Final Student ) (472 Points)
Replied 07 September 2011

Hi Priya

Basically sections are provided What is Law ?

AOA of the company accelerate the law.

which is legally right.

In your case, As per the language of AOA

“Subject to the provisions of the Act, any preference shares may, with the sanction of an ordinary resolution, be issued on the terms that they are, or at the option of the Company, are liable, to be redeemed on such terms and in such manner as the Company, before the issue of the shares as may, be special resolution determine."

General Meeting is Necessary and special resolution is required to issue shares. .

rest depending upon your knowledge.

Thanks and Regards

Suraj Pahuja

pahuja (C.A Final Student ) (472 Points)
Replied 07 September 2011

Originally posted by : Priya Sharma
	Will the action of issuing new shares for the purpose of redemption of existing preference shares fall under the net of section 81(1A) of the Act?

Yes you are right..

sakshi (CS) (261 Points)
Replied 07 September 2011

Section 81(1)(A) is not applicable. I wanted to ask if section 81 is applicable?

AMIT MISHRA (Legal Professional) (393 Points)
Replied 07 September 2011

Hi Sakshi,

Yes section 81 would be applicable whereby the redemption is being made by further issue of shares

Thanks & Regards

Amit Mishra

hetvi (manager) (21 Points)
Replied 26 July 2012

if any company does not have ant reserve due to non operation of any business than in that case how company can redeem pref shares if company have enoungh fund in bank a.c

P C Agrawal (Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad) (8229 Points)
Replied 26 July 2012

The options available are:

1. Change the terms of issue by extending date of redemption u/s 106

2. Issue new shares and redeem preference shares out of new issue

3. Reduce share capital with the approval of high court u/s 100

Biren Nagia (Corporate Lawyer) (34 Points)
Replied 18 November 2014

In case of Redemption of Preference Shares as provided U/s. 55 of Companies Act, 2013, does a PRIVATE COMPANY reuires to issue a PUBLIC NOTICE in a newspaper with regard to such Redemption of Preference Shares?