Redemption of preference shares

You should not consider securities premium to arrive at the amount to be transferred to the capital redemption reserve. However, when we have to compute the amount to be raised, we need to consider securities premium as it would also be received. Go through the explanation before the illustration. You will be able to understand.

CA Suraj Lakhotia

Admin

23-Dec-19 13:37

Sir, you said an example which consists fresh equity shares to be issued @â?¹5000 of face value â?¹10 +premium â?¹10 there,,, you said 5000/10=500 shares must be issued but not 5000/20 =250 shares,, because we cannot use security premium to redeem preference shares

Thread Starter

Star Ca

CA Inter

★ 3K+

23-Dec-19 16:41

There are two types of problems solved in class. First - When sufficient cash is available for redemption and we need to arrive at number of fresh shares to be issued. In this case if no amount is to be transferred to CRR, then we must ensure that face value of shares redeemed = face value of shares issued [Hence premium is not considered to compute the number of shares] Second - When sufficient cash is not available and fresh shares are being issued to raise cash for redemption. Here, to know how many shares have to be issued to ensure sufficient cash balance, we will consider premium also as premium will be collected from new shares issued.

CA Suraj Lakhotia

Admin

24-Dec-19 10:25

Yes.. Sir now i have clearly under stood..... Thank you so much sir

Thread Starter

Star Ca

CA Inter

★ 3K+

24-Dec-19 10:33

Welcome!

CA Suraj Lakhotia

Admin

24-Dec-19 16:02

Thanks for asking this question

Divya tejasri

CA Inter

★ 13K+

18-Feb-20 11:16