Sec55 Redemption of preference shares

Corporate & Other Laws

If free reserves are transferred to capital redemption reserve for repayment of preference shares,but in the lecture it is said that this capital redemption reserve is used specifically for bonus shares,then how come they redeem preference shares wid it?? And next question is Don't these preference shares owners get any interest or divident for the shares that they hold ,in lectures they said it is redeemed as nominal value??.What is the purpose of having these preference shares when they have to be redeemed at nominal value itself

Pramod Rajpurohit

CA Inter

★ 0

17-Jan-23 15:15

538

Answers (3)

Resumption as per company law need to transfer amount to CRR account afterwards settle then CRR any balance in that account MAY use for bonus issue

Periyakaruppan Sekar

CA Inter

★ 970

18-Jan-23 09:06

Next question , in case companies position unable to repay pref sh or unable to pay divident then settle in nominal value with consent of 3/4 th pref share holders of such class AND getting approval of Tribunal

Periyakaruppan Sekar

CA Inter

★ 970

18-Jan-23 09:13

The bank balance is used for redemption. This is the source of redemption. When shares are redeemed without fresh issue of shares, the company act requires amount to be transferred to CRR. The reason for this is to ensure that such amount is not distributed shareholders as dividend. This protects the interest of creditors. PReference share are entitled to dividends which are paid as and when declared by the company You will have an indepth understanding of this in Accounts.

CA Suraj Lakhotia

Admin

18-Jan-23 11:00