For redemption of preference shares there is a clause that: A sum equivalent to the nominal amount of shares being redeemed shall be transferred to the Capital Redemption Reserve.
My question is: After preference shares get redeemed where the nominal amount of shares come from to be transferred to the Capital Redemption Reserve.
Doesn’t a company return nominal value to shareholders while redemption in order to transfer the same value to the Capital Redemption Reserve?
As far as i know
the amount has to be taken from free reserves & transferred to CRR so as keep the capital intact....
1) Can you elaborate your point that" want to maintain capital base"? I mean how it is maintained.
2) Also elaborate about "Capital level is maintained after the redemption"?
How Capital base will return to the same level after redemption when CRR Account is created? As only total face value is transferred to CRR account.
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