Redemption of preference shares

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Querist : Anonymous

Querist : Anonymous (Querist)

31 December 2012 sir

am having doubt regarding redemption of preference shares at premium..

1.whether in company income statement have to create provision regarding premium

2. what is the maximum percentage to redeem pref.shares at premium.

please clarify my doubts and reply soon sir...

Ajay Mishra

Ajay Mishra (Expert)
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31 December 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 (Appendix 4 & 5):—
(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.

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