Incorporation

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arjun g

arjun g (Querist)
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01 December 2011 Hello All

Can Private Limited compnay be incorporated by having only preference share capital

RG - A Helping Hand

RG - A Helping Hand (Expert)
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02 December 2011 Yes according to me it is possible.

Reading of section 3(1)(iii) suggests that a private company can be incorporated with a paid up capital of Rs. 1 Lac. It is not about equity or preference.

Minimum Paid up capital should be Rs. 1 Lac. It may be preference or equity.

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CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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02 December 2011 No.

A company can not have only preference share capital.

The ordinary meaning of the word "preference" is priority or first choice or preferential treatment. Thus, when you use the word "preference" it is assumed that there exist two things between you distinguish and prefer one of them against the other.

For the existence of preference share capital, thus, presupposes existence of equity shares capital. In other words, without equity share capital there can't be preference share capital.

The Patna high court has also held that before there can be preference shares, there must be at least two classes of dividends governing two such classes of shares in which one class is given a preferential treatment over the other.

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