Preference dividend
This query is : Open
24 July 2013
Here is a query
A newly formed company wants to issue cumulative preference share
The divided will be paid as equity shares
can the dividend be converted into equity shares in case there is no profit in the company and reserves are also negative.
do we need to show dividend payable every year or only at the time of conversion
please answer
A newly formed company wants to issue cumulative preference share
The divided will be paid as equity shares
can the dividend be converted into equity shares in case there is no profit in the company and reserves are also negative.
do we need to show dividend payable every year or only at the time of conversion
please answer
Ajay Mishra
(Expert)
24 July 2013
Hi
First of all check your articles, which give permit or not to do so.
Generally, the dividend are not converted in to equity shares.
First of all check your articles, which give permit or not to do so.
Generally, the dividend are not converted in to equity shares.
24 July 2013
there is permission for conversion
but can it convert its preference dividend to equity shares in case of loss and no rserves
but can it convert its preference dividend to equity shares in case of loss and no rserves
Ajay Mishra
(Expert)
24 July 2013
Requirement for redemption of shares:
Section 80(1) provides conditions for redemption of preference share which has to be complied with by a company :—
(1) The preference shares shall be redeemed out of profits of the company which would otherwise be available for distribution as dividend or out of the proceeds of a fresh issue of shares made for the purpose of redemption.
(2) Only fully paid preference shares shall be redeemed.
(3) The premium, if any, payable on redemption shall be provided out of profits or out of the company's security premium account, before the shares are redeemed.
(4) Where any preference shares are redeemed out of profits, a sum equivalent to the nominal value of the shares redeemed shall be transferred to the capital redemption reserve fund.
Requirement for redemption of shares:
Section 80(1) provides conditions for redemption of preference share which has to be complied with by a company :—
(1) The preference shares shall be redeemed out of profits of the company which would otherwise be available for distribution as dividend or out of the proceeds of a fresh issue of shares made for the purpose of redemption.
(2) Only fully paid preference shares shall be redeemed.
(3) The premium, if any, payable on redemption shall be provided out of profits or out of the company's security premium account, before the shares are redeemed.
(4) Where any preference shares are redeemed out of profits, a sum equivalent to the nominal value of the shares redeemed shall be transferred to the capital redemption reserve fund.
24 July 2013
can the dividend be converted to shares in case of loss??
prefrence share issued is cummulative preference share
prefrence share issued is cummulative preference share
Ajay Mishra
(Expert)
24 July 2013
read above answer carefully.
Cumulative preference shares.—In the case of cumulative preference shares, the shareholders are entitled to receive the dividend for a year which could not be paid due to losses or inadequate profits in the subsequent year(s) whenever there are sufficient profit.
Cumulative preference shares.—In the case of cumulative preference shares, the shareholders are entitled to receive the dividend for a year which could not be paid due to losses or inadequate profits in the subsequent year(s) whenever there are sufficient profit.
24 July 2013
so if there is no profit then can the dividend be converted to equity shares or not
Ajay Mishra
(Expert)
24 July 2013
No, he has no right of equity shares if the company has no profit.
24 July 2013
if SR is passed and equity shareholders agree to convert it,
can it be converted?
can it be converted?
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