Redemption of Pref Capital

Others 864 views 3 replies

Saurabh Mittal

Service

26 Points Posted on 06 February 2009

Section 80 says that preference shares can be redeemed out of the profits otherwise available for the dividend. In general, dividend can be paid out of current year profit. Dividend can also be paid out of past profit but subject to certain conditions.

My questions :

1.Can we redeem Preference Shares out of Past Profits.

2. Whether entire accumulated profits qualified for redemption or the amount remaining after the conditions stiplutated for dividend is available for redemption.

Pl. see and reply.

Thanks

Saurabh Mittal

Replies (3)

Amit Gupta

Loosening Myself

1508 Points Posted on 06 February 2009

The co. can redeem its Pref shares out of profits(inculding past yrs) and the amt of free reserves i.e. the amt that can be used to distribute profits can be used for redemption.

The main concept is to redeem out of funds available for distribution of dividents.

Saurabh Mittal

Service

26 Points Posted on 09 February 2009

Originally posted by :Saurabh Mittal
"	Section 80 says that preference shares can be redeemed out of the profits otherwise available for the dividend. In general, dividend can be paid out of current year profit. Dividend can also be paid out of past profit but subject to certain conditions. My questions : 1.Can we redeem Preference Shares out of Past Profits. 2. Whether entire accumulated profits qualified for redemption or the amount remaining after the conditions stiplutated for dividend is available for redemption. Pl. see and reply. Thanks Saurabh Mittal	"

But the entire past profits (including reserves) are not available for distribution as dividend. There are certain conditions attached for payment of dividend out of past profits. So, are these conditions applicable on redemption of pref shares also ?

hemishp

Company Secretary

32 Points Posted on 11 February 2009

Nope the conditions of past profits being distributed as dividend does not apply. Those conditions only apply solely for distributions of dividends only.

However, amount utilised for redemption of preference shares less if any proceeds of issue from equity shares utilitised for redemption should be tranferred to capital redemption reserve.