Preference shares

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sachin (Querist)
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28 March 2012 kindly give me answer regarding preference shares
our is pvt ltd company and issued a 6% non cumulative preference shares with Face Value Rs.10 and Premium Rs. 90 for 3 years.. now 3 years completed.but still company is not operating any business activity hence there is no profit.. now we have to redeem said shares.. can we redeem it by issuing a fresh issue or any.. kindly let me give full procedure for redemption of preference shares and issues of fresh shares...
will be grtful...
Regards,
Sachin

Ajay Mishra

Ajay Mishra (Expert)
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28 March 2012 Hi

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.

Regards

sachin

sachin (Querist)
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28 March 2012 hi Thanks Sir,,
but i have some few queries
the preference shares redemption is now including premium upto 10cr.. now company going to issue fresh preference shares for Rs. 2cr Only.. now how can we redeemed all previous preference shares.. is any other way can we redeem shares ? there is only two way for redemption i.e. out of profit and issue of fresh shares... suppose there is no profit and no fresh issue and redemption is due now how can we redeemed preference shares??????

Ajay Mishra

Ajay Mishra (Expert)
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28 March 2012 Hi

Read proviso of section 80A (1) of the Companies Act, 1956.

If a company fails to comply with the provisions of section 80A, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to Rs. 10,000 for every day during which such default continues and every officer of the company in default shall be punishable for a term which may extend to 3 years and shall also be liable to fine.

Regards

sachin

sachin (Querist)
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28 March 2012 i know sir,, but want to know any other way to redeem shares, so i m just expecting that is any way out to redeem shares

Ajay Mishra

Ajay Mishra (Expert)
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28 March 2012 Hi

As per my knowledge i give my best. Other views will also be solicited.

sachin

sachin (Querist)
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28 March 2012 ok , thank you so much for ur nice co-operation

regards,
Sachin

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