A query related to redemption of prefrence shares.

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jinal jain (Querist)

24 April 2013 why preference shares can't be redeemed when they are partly paid up.why we have to convert first into fully paid up and then redeemed it.whats the logic behind that?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)

19 May 2013 Since the payment has not been made to make the Preference shares as fully paid it cannot be redeemed. The logic behind this is that as per the contract as till the ownership is transferred fully you cannot become the owner. Suppose you have purchased a car for say 5 lacs and you have taken it on installment and paid only 1 lac now if you want to sale the car you cannot do it because the first preference is that of the financer and he can at any moment dragged your car and sale it. The party paid preference shares a can be forfeited but cannot be redeemed.

jinal jain

jinal jain (Querist)

31 May 2013 but if it is like the company has not make any call n decided to call for the amt when the company liquidates which is called as reserve capital so if the company is in good position and there is no chance of liquidation so what will be done at the time of redemption.as 2 partly paid up preference shares will be redeemed or not??

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