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Term sheet for issue of preference shares

CS Smriti Sharma (ACS, B Samrish & Co.) (880 Points)

09 July 2012

A private limited comany wants to issue prefernce shares at premium. Can anybody please provide me the format of term sheet for the same.

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CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 09 July 2012

The terms may be as under:

Terms and Conditions for issue of Redeemable Cumulative Preference Shares and redemption thereof:

1. Preference Shares will be issued at par i.e. face value of Rs. 10/- each.

2. The coupon rate (i.e. the rate of dividend) will be 12%.

3. The Preference Shares will be classified as “12% Redeemable Cumulative Preference Shares”.

4. Preference Shares will carry preferential (cumulative) right to dividend, at coupon rate, when declared.

5. The dividend will be calculated pro rata i.e. from the date of allotment of such Preference Shares.

6. The Preference Shares will not carry any voting rights except in case of any resolution placed before the Company which directly affects the rights attached to such shares or otherwise provided in the Companies Act.

7. The Preference Shares will have the maximum redemption period of 10 years. However, the same may be redeemed fully or in such trenches, before the aforesaid period, at discretion of the Board.

8. Only fully paid up Preference Shares will be redeemed.

9. The Preference Shares will be redeemed at par.

10. The Preference Shares will be redeemed out of profits of the Company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purposes of the redemption.

Others:

1. The Company shall, out of yearly profits which would otherwise have been available for dividend, transfer such sum as decided by the Board to “Capital Redemption Reserve Fund” for the purposes of redemption of Preference Shares.

2. The redemption of Preference Shares will not be taken as reducing the Authorised Share Capital of the Company.

3. Where any Preference Shares are redeemed out of profits which would otherwise have been available for dividend, a sum equivalent to the nominal value of the Preference Shares redeemed will be transferred to the “Capital Redemption Reserve Account”.

4. If the Preference Shares are redeemed at a premium, premium will be provided either out of Securities Premium Account or Profit and Loss Account.

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