20 December 2010
You need to pass the Board resolution fixing the terms and conditions and allotment of preference shares. then file form 2 with the ROC.
However AOA should contain authority to Board for issuing different class of shares.
1) As per Sec.80(1) a company limited by shares may if so authorised by its articles, issue preference shares.
2) Sec.291(1) authorises Board, subject to the provisions of the Act, to exercise all such powers as the company is authorised to exercise.
3) The Act does not require that shareholders approval is required for issue of preference shares.
In view of the above, we can say that subject to provisions in the Articles to the contrary, the Board of a private co. is authorised to issue preference shares.
Redemption of preference shares does not amount to reduction of authorised capital as provided in Sec.80(3).
20 July 2025
Sure! Here's a detailed outline and sample formats to help with issuing Redeemable Preference Shares by a Public Limited Company:
1. Pre-requisites: Articles of Association (AOA): Should contain a clause authorizing the Board to issue different classes of shares including preference shares. If not present, you must pass a special resolution to amend the AOA to include this power. Board Resolution: Board must pass a resolution fixing the terms and conditions of the preference shares (including redemption terms). File Forms with ROC: Form PAS-3 (Return of allotment) must be filed after allotment. If AOA is altered, file MGT-7 and SH-7 (for alteration of AOA) with ROC. 2. Sample clause for AOA to empower Board to issue preference shares Insert a new Article like:
"The Board of Directors shall have the power to issue preference shares in one or more series or classes, whether cumulative or non-cumulative, convertible or non-convertible, redeemable or non-redeemable, and to fix the terms, conditions, rights, and privileges attached to such shares." 3. Sample Board Resolution to issue Redeemable Preference Shares "RESOLVED THAT pursuant to the provisions of Sections 43, 55, 62 and other applicable provisions of the Companies Act, 2013, and the Articles of Association of the Company, the Board hereby approves the issue and allotment of [number] Redeemable Preference Shares of face value Rs. [value] each at par/premium of Rs. [value], aggregating to Rs. [amount], to [name of allottees], on such terms and conditions as detailed below: Nature of shares: Redeemable Preference Shares Dividend rate: [specify rate] Redemption period: The shares shall be redeemed at par/premium on or before [date or period] Redemption mode: [Specify mode of redemption e.g., out of profits or fresh issue of shares] Voting rights: [Specify if any or as per the Act] RESOLVED FURTHER THAT the Board be and is hereby authorized to do all such acts, deeds, matters and things as may be necessary to give effect to this resolution including filing of necessary forms with the Registrar of Companies."** 4. Procedure summary Step Action Check AOA Ensure AOA authorizes Board to issue preference shares Amend AOA (if required) Pass special resolution and file SH-7 with ROC Pass Board Resolution Approve terms & allot preference shares Allot shares Issue share certificates to shareholders File PAS-3 with ROC Within 30 days of allotment