Reduction of share capital

335 views 5 replies
does redemption of preference capital will result to reduction of share capital of the company, if yes then why?
Replies (5)
Yes redemption leads to reduction in share capital. On redemption compny pay back their amt of share capital by which share capital reduced.
As per section 55, redemption of preference shares does not amount to reduction in share capital, read with section 66 (regards to reduction of share capital).
As per companies act, 2013 now only redeemable preference shares can be issued.
So it's obvious that payment is mandatory thus doesn't cause reduction as per section 66 of companies act, 2013.
Following will not consider as a reduction of share capital:

i. Where a company cancels shares which have not been taken or agreed to be taken. This is not, however, deemed to be a reduction of capital. (Section 61)

ii. Where redeemable preference shares are redeemed in accordance with the provisions of sections 55.

iii. Where any shares are forfeited for non-payment of calls, though the forfeiture as a fact amounts to a reduction of capital.

iv. Where there is a surrender of shares or a gift is made to a company of its own shares. (The gift may be accepted in the name of a nominee of the company).

v. Where the nominal share capital of a company is reduced by cancelling any shares which have not been taken or agreed to be taken by any person.

vi. Where company purchases its own shares in pursuance of the provisions in section 68.

vii. Where a sum of money was received for allotment of shares but that could not be done, paying back that money to the depositor did not require the procedure for reduction of capital even though the money was shown as a part of company's subscribed capital.

Redemption will be done from which Source?
Will it be done from General reserve ot any other reserve is to be created for redemption of Preference Shares 

redemption of preference shares can be done from Free reserves i.e General reserves or p&l

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
ARTICLESHIP 30 June 2026
Taxation Content Writer Intern

Interactive Media Pvt Ltd.

New Delhi

CA Inter

View Details
Company
ARTICLESHIP 30 June 2026
Article Assistant or Paid Assistant

VIKAS VERMA & CO

New Delhi

Others

View Details
Company
ARTICLESHIP 20 June 2026
Articleship

RB KESHRI & CO

Mumbai

B.Com

View Details
Company
22 June 2026
Accountant

Global Image Technologies Private Limited

New Delhi

MBA

View Details
Company
Featured 24 June 2026
HEAD - AUDIT AND TAXATION

A R JADHAV AND ASSOCIATES

Mumbai

CA Inter

View Details
Company
29 June 2026
Accountant (Finance & Compliance)

TRIEYEZ

Kolkata

CA

View Details
Company
24 June 2026
Chartered Accountant - GST & Direct Tax

APL

Mumbai

CA

View Details
Company
ARTICLESHIP 08 June 2026
Internal & Taxation Article

O P Bagla & Co LLP

New Delhi

CA Inter

View Details