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Issue of Preference Shares at premium

10 December 2010

Can a Company issue the preferrence shares at premium ?????? If yes then under which section. Please specify the guidelines, ciruclars etc.

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13 Replies

HARDIK (COMPANY SECRETARY NCFM (Corporate Governance )) (664 Points)
Replied 10 December 2010

Yes a company can issue preference share at premium. First see whether your article provide authority to issue preference shares.

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 10 December 2010

Yes a company can issue preference shares at a premium.

As per Section 78 securities can be issued at a premium. Securities includes shares both equity and preference.

SOURABH GUPTA (CS) (100 Points)
Replied 10 December 2010

Thanks for ur answer.

Can you specifically provide the name of any company (for example) who have issued the preference shares at premium. I think that some where in Company Law there is prohibition for a Company to issue pref. shares at premium.

However I am also agree with the provision of section 78 of Co. Act that the shares can be issued at discount or at premium and the word " Securities" itself includes both equity and preference shares.

Please provide any guidance material or any other thing in support of this.

Regards

Rajeev kumar Nayak (ACS) (283 Points)
Replied 11 December 2010

Hi,

There is no prohibition under the Companies Act, 1956 for issue of preference shares at premium.

It is left on the company to decide the issue price. the only restriction is in accounting treatment where amount of premium is transferred to Securities Premium Account and this account can be used only for limited purpose as specified under Section 78 of the Act.

Rajeev

SOURABH GUPTA (CS) (100 Points)
Replied 11 December 2010

o.k.

What will be the situation in case of listed companies. Whether it will requires shareholders approvals for doing the same.

Rajeev kumar Nayak (ACS) (283 Points)
Replied 12 December 2010

There is no difference in case of listed company. there is no need to take shareholder approval.

Rajeev

Syam kamal (Company Secretary) (156 Points)
Replied 13 December 2010

In case of public companies, issue of shares to any person other than existing shareholders requires shareholders approval by way of special resolution.

Issue of Preference shares to existing shareholders by public companies whether listed or not – Board resolution is enough

Issue of Preference shares to any persons other than existing shareholders by public companies whether listed or not – Shareholders approval by way of special resolution

Further issue of shares by private companies – Depends upon the articles of the company

Any other views????????

CA Deepesh Ruhela (Keen to Learn) (3271 Points)
Replied 14 December 2010

u/s 78, share can be issued at premium

RASNA GOYAL (company secretary) (25 Points)
Replied 07 January 2011

Hi,

Can anybody tell me how to determine rate of Dividend in order to issue redemmable preference shares

Can anybody sent me the special resolution to be passed for issue of Preference shares to any persons other than existing shareholders by unlisted public companies for getting shareholders approval

Regards

Rasna Goyal

Chirag (CA) (33 Points)
Replied 07 January 2011

HI,

IT HAS BEEN SEEN THAT PROFESSIONALS HERE ARE COMING SEEK PETTY SOLUTIONS LIKE TO GET READY-MADE RESOLUTIONS FOR DIFFRENT MATTERS,ETC.

DOES IT JUSTIFIES THEIR PROFESSIONAL CAPACITIES? A SIMPLE APPLICATION OF MIND AND READING OF LEGAL PROVISIONS CAN MAKE SOLUTION TO THEIR PROBLEMS. PLEASE DO NOT SEEK READY MADE SOLUTIONS.

I ALSO APPEAL TO OTHER MEMBERS NOT TO PROVIDE ANY SHORT CUT TO SUCH PEOPLE, LET THEM APPLY THEIR OWN MIND.

PLEASE KEEP THIS FORUM ALIVE FOR HEALTHY PROFESSIONAL DISCUSSIONS..

THANKS

Rahul Vora (employee) (21 Points)
Replied 29 February 2012

Can the premium on preference shares be based upon issue price of the shares.And what if a co. wants to redeem the preference shares at a premium on issue price and not face value is it permissible.

(Guest)

Pref share are redemmable as per terms of issue. If terms of issue says for redemption on face value you have to redeem on face value.

If you want to redeem on premium than first convene meeting of pref shareholder and make alteration in the terms of redemption of pref share from face value to premium.

Thanks