Issue of preference shares

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ankita (Querist)
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23 June 2013 A company has its authorised capital of Rs.50 lakhs. It wants to issue preference shares.
The authorised capital will increase from Rs.50 lakhs to Rs. 1.5 crores. Whether I can increase authorised capital by issuing 50% equity shares & 50% preference shares.Give sample resolution for the same.

Ajay Mishra

Ajay Mishra (Expert)
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23 June 2013
“RESOLVED THAT pursuant to the provisions of Section 94 and other applicable provisions if any of the Companies Act, 1956 (including any Statutory modification or re-enactment thereof for the time being in force) the Authorised Capital of the Company be and is hereby increased from Rs. 30,00,00,000 (Rupees Three Crores) to Rs. 60,00,00,000 (Rupees Sixty Crores) by creation of new 1,00,00,000 (One Crores) new Equity shares of Rs. 10/- (Rupees Ten) each ranking pari passu in all respects with the existing equity shares and 20,00,000 (Twenty Lacs) 8% Non-Cumulative Convertible Preference Shares of Rs. 100/- (Rupees Hundred) each.

“RESOLVED FURTHER THAT pursuant to the provisions of Section 16 and other applicable provisions if any of the Companies Act, 1956 (including any Statutory modification or re-enactment thereof for the time being in force) the existing Clause-V of the Memorandum of Association of the Company be and is hereby substituted by the following new Clause-V:

V. The Authorised Share Capital of the Company is Rs. 60,00,00,000/- (Rupees Sixty Crores) divided into 4,00,00,000 (Four Crore) Equity Shares of Rs.10/- (Rupees Ten) each and 20,00,000 (Twenty Lacs) 8% Non-Cumulative Convertible Preference Shares of Rs. 100/- (Rupees Hundred) each.”
RESOLVED FURTHER THAT any director or secretary of the Company be and is hereby authorised to make application, file forms, etc. for increase in Authorised Share Capital of the Company with the Registrar of Companies office and are hereby further authorised to do all such acts, deeds and things as may be required or deemed expedient to implement this resolution.”

Ajay Mishra

Ajay Mishra (Expert)
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23 June 2013
Procedure to issue Redeemable Preference Shares
1. Articles of Association of the Company must authorise issue of redeemable preference shares; if not, steps should be taken to alter them accordingly.

2. Obtain ‘credit rating’ from any of the approved credit rating agencies.

3. Call a Board Meeting by giving notice to all the directors of the company as per section 286 and take the decision of issuing redeemable preference shares and fix up the date, time, place and agenda for calling a General Meeting to pass an Ordinary Resolution

4. Issue notices in writing at least twenty-one days before the date of the General Meeting proposing the resolution with suitable Explanatory Statement.

5. Inform the Stock Exchange at which the securities of the Company are listed about such proposed issue of redeemable preference shares.

6. Hold the General Meeting and pass the resolution (if it is made on private placement basis, pass special resolution under section 81(1A) and if the issue is made on right basis, comply with section 81(1).

7. If the resolution passed is a Special Resolution, file the same with the ROC in e-Form No. 23 within thirty days of its passing.

8. If the issue of redeemable preference shares is to be made by issue of Prospectus, then prepare a draft Prospectus in consultation with the Lead Manager responsible for such drafting. Follow the procedure for Public Issue of Shares.

9. Make allotment by passing a resolution at a duly convened Board Meeting.

10. File a return of allotment in e-form 2 with ROC.

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