Reclassification of preference shares.

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abhijit nair (Querist)
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29 March 2012 Background
My company had issued Preference shares. Now we are changing the nature of preference shares form redeemable to convertible shares( in to equity after 10 years). For this purpose as per FEMA guidelines we had to arrive at value of equity shares as per DCF method. Accordingly we arrived at value, which as per FEMA must be the minimum price of conversion in future.
Query
Above change would result in amendment of Authorised capital, AOA,MOA. For that purpose we will have to hold EGM and Preference Shareholders meeting.My query is should the members and preference shareholders must be informed about the valuation report. Is their approval required for the BOD to issue the reclassified preference shares after considering the Valuation Report.

Ajay Mishra

Ajay Mishra (Expert)
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29 March 2012 Hi

Yes, Authorised share capital of MOA and AOA will changed accordingly.

In this case approval of preferential shareholders approval is not required. He has no right to vote in general meeting except non payment of cumulative dividend.

Regards

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abhijit nair

abhijit nair (Querist)
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29 March 2012 Sir,

Thanks , but what about the valuation of equity shares. Should the members be aware of it, before the board acts on the basis of the Report.

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