Terms and Conditions for Issue and redemption of preference shares (Section 55) read with Rule 9 & Rule10 of Companies (Share Capital and Debentures) Rules, 2014
(i) Company cannot issue irredeemable preference shares or redeemable preference shares with the redemption period beyond 20 years.
except (In case of infrastructure co.)
- A company engaged in the setting up and dealing with of infrastructural projects may issue preference shares for a period exceeding 20 years but not exceeding 30 years,
- subject to the redemption of a minimum 10% of such preference shares per year from the 21st year onwards or earlier, on proportionate basis, at the option of the preference shareholders.
(ii) Issue of preference share must be authorized by AOA & passing SR in GM.
(iii) Only fully paid up preference shares can be redeemed.
(iv) Preference Shares shall be redeemed out of the -
- Profits of the company.
- Proceeds from issue of fresh securities for the purpose redemption of such preference shares.
Note - where such shares are proposed to be redeemed out of the profits of the company, there shall, out of such profits, be transferred, a sum equal to the nominal amount of the shares to be redeemed, to a reserve, to be called the Capital Redemption Reserve Account (CRR A/c).
(v) The company, at the time of such issue of preference shares, has no subsisting default in the redemption of preference shares issued earlier or in payment of dividend due on any preference shares.
(vi) A company may redeem its preference shares only on the terms on which they were issued.
(vii) Redemption can be done at -
- At a fixed time, or
- Any time at the company’s option, or
- Any time at the shareholder’s option.
(vii) If a company is not in a position to redeem any preference shares or to pay dividend then -
- Take consent of 3/4th preference shareholders &
- With the approval of the Tribunal on a petition made by it in this behalf.
(viii) When a company issues preference shares, the Register of Members maintained under section 88 shall contain the particulars in respect of such preference share holder's.