Reedemed preferance share

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MUKESH JOSHI (Querist)

28 June 2013 We want to redeemed Preference Share in a private company by issuing Equity Shares because we doesn't have enough profit to create Capital Redemption Reserve and redeemed accordingly, Secondly, the Redeemed Preference Shares holder is a Private Company, then what is the procedure to be followed.

Ajay Mishra

Ajay Mishra (Expert)

28 June 2013 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.

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MUKESH JOSHI

MUKESH JOSHI (Querist)

28 June 2013 Thanks a Lot for your early reply sir, But sir I want to know that if we issue new equity shares then whether paid up share capital will increase accordingly or not, and the holder of preference share is a private company then how the procedure to issue new equity shares will be made, whether that company who hold the preference share has to pass a board resolution to authorized a person to act in behalf of the Company or we can issue directly new equity shares, please explain the procedure in detailed.

Ajay Mishra

Ajay Mishra (Expert)

28 June 2013 Read what your articles and resolution says about it.

Please also check any agreement if you have made with party.

Generally after redemption of preference shares the existence of preference share will be end and equity shares will be created.

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