ISSUE AND REDEMPTION
OF PREFERENCE SHARES
No company limited by shares shall issue any preference shares which are
irredeemable. Provided that if so authorised by its articles, company can issue
preference shares which are liable to be redeemed within a period not exceeding
20 years from the date of their issue subject to such conditions as may be
prescribed:
Provided that a company may
issue preference shares for a period exceeding 20 years for
infrastructure projects, subject to the redemption of such percentage of
shares as may be prescribed on an annual basis at the option of such
preferential shareholders:
COMMENT: ISSUE
AND REDEMPTION OF PREFERENCE SHARES BY COMPANY IN INFRASTRUCTURAL PROJECTS
A company engaged in the setting up and dealing
with of infrastructural projects may issue preference shares for a period
exceeding twenty years but not exceeding thirty years, subject to the
redemption of a minimum ten percent of such preference shares per year from the
twenty first year onwards or earlier, on proportionate basis, at the option of
the preference shareholders.
Provided further that—
(a) Shares shall be redeemed out of the 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 such redemption;
|
(b) Shares shall be fully paid;
|
(c) 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, and the provisions of
this Act relating to reduction of share capital of a company shall, except as
provided in this section, apply as if the Capital Redemption Reserve Account
were paid-up share capital of the company; and
|
(d) (i) in case of such class of companies, as may be
prescribed and whose financial statement comply with the accounting standards
prescribed for such class of companies under section 133, the
premium, if any, payable on redemption shall be provided for out of the
profits of the company, before the shares are redeemed:
NOTE: Premium, if any, payable on redemption of any preference shares
issued on or before the commencement of this Act by any such company shall be
provided for out of the profits of the company or out of the company's
securities premium account, before such shares are redeemed.
|
(ii) in a case not falling under sub-clause (i) above,
the premium, if any, payable on redemption shall be provided for out of the
profits of the company or out of the company's securities premium account,
before such shares are redeemed.
|
*(3) Where a company is not in a position to redeem
any preference shares or to pay dividend, if any, on such shares in accordance
with the terms of issue (such shares hereinafter referred to as unredeemed
preference shares), it may, with the consent of the holders of three-fourths in
value of such preference shares and with the approval of the Tribunal on a
petition made by it in this behalf, issue further redeemable preference shares
equal to the amount due, including the dividend thereon, in respect of the
unredeemed preference shares, and on the issue of such further redeemable
preference shares, the unredeemed preference shares shall be deemed to have
been redeemed:
Provided that the Tribunal
shall, while giving approval under this sub-section, order the redemption
forthwith of preference shares held by such persons who have not consented to
the issue of further redeemable preference shares.
COMMENT—For the removal of doubts, it is hereby declared
that the issue of further redeemable preference shares or the redemption of
preference shares under this section shall not be deemed to be an increase or,
as the case may be, a reduction, in the share capital of the company.
(4) The capital redemption reserve account may, notwithstanding anything
in this section, be applied by the company, in paying up unissued shares of the
company to be issued to members of the company as fully paid bonus shares.
PROCESS FOR REDEMPTION OF PREFERENCE SHARES:
Call Meeting of Board Director:
·
Issue Notice of
Board Meeting to all the directors of company at least 7 days before the date
of Board Meeting.
·
Attach Agenda of
Board Meeting along with Notice.
Hold the Board Meeting:
·
Check the quorum
of Board Meeting.
·
Pass Board
Resolution for approval of Redemption of Preference Shares.
·
Present Letter
for redemption of Preference Shares before the members of the meeting.
File Form with Registrar:
·
File SH-7 with
Registrar within 30 days of passing of Resolution.
·
Certified True
copy of Resolution.
·
Minutes of
Meeting
COMMENT—For the purposes of
sub-section (2), the term "infrastructure projects" means the
infrastructure projects specified in Schedule VI
COMMENT: THE TERM “INFRASTRUCTURAL PROJECTS” OR
“INFRASTRUCTURAL FACILITIES” INCLUDES THE FOLLOWING PROJECTS OR ACTIVITIES:—
(1) Transportation (including inter modal
transportation), includes the following:—
(a) roads, national highways, state highways, major
district roads, other district roads and village roads, including toll roads,
bridges, highways, road transport providers and other road-related services;
(b) rail system, rail transport providers, metro
rail roads and other railway related services;
(c) ports (including minor ports and harbours),
inland waterways, coastal shipping including shipping lines and other port
related services;
(d) aviation, including airports, heliports,
airlines and other airport related services;
(e) logistics services.
(2) Agriculture, including the following, namely:—
(a) infrastructure related to storage facilities;
(b) construction relating to projects involving
agro-processing and supply of inputs to agriculture;
(c) construction for preservation and storage of
processed agro-products, perishable goods such as fruits, vegetables and
flowers including testing facilities for quality.
(3) Water management, including the following,
namely:—
(a) water supply or distribution;
(b) irrigation;
(c) water treatment.
(4) Telecommunication, including the following,
namely:—
(a) basic or cellular, including radio paging;
(b) domestic satellite service (i.e., satellite
owned and operated by an Indian company for providing telecommunication
service);
(c) network of trunking, broadband network and
internet services.
(5) Industrial, commercial and social development
and maintenance, including the following, namely:—
(a) real estate development, including an
industrial park or special economic zone;
(b) tourism, including hotels, convention centres
and entertainment centres;
(c) public markets and buildings, trade fair,
convention, exhibition, cultural centres, sports and recreation infrastructure,
public gardens and parks;
(d) construction of educational institutions and
hospitals;
(e) other urban development, including solid waste
management systems, sanitation and sewerage systems.
(6) Power, including the following:—
(a) generation of power through thermal, hydro,
nuclear, fossil fuel, wind and other renewable sources;
(b) transmission, distribution or trading of power
by laying a network of new transmission or distribution lines.
(7) Petroleum and natural gas, including the
following:—
(a) exploration and production;
(b) import terminals;
(c) liquefaction and re-gasification;
(d) storage terminals;
(e) transmission networks and distribution networks
including city gas infrastructure.
(8) Housing, including the following:—
(a) urban and rural housing including public / mass
housing, slum rehabilitation, etc;
(b) other allied activities such as drainage,
lighting, laying of roads, sanitation and facilities.
(9) Other miscellaneous facilities/services,
including the following:—
(a) mining and related activities;
(b) technology related infrastructure;
(c) manufacturing of components and materials or
any other utilities or facilities required by the infrastructure sector like
energy saving devices and metering devices;
(d) environment related infrastructure;
(e) disaster management services;
(f) preservation of monuments and icons;
(g) emergency services (including medical, police,
fire and rescue).
(10) such other facility service as may be
prescribed.
DISCLAIMER: THE ARTICLE IS BASED ON THE RELEVANT PROVISIONS AND AS PER THE
INFORMATION EXISTING AT THE TIME OF THE PREPARATION. IN NO EVENT I SHALL BE
LIABLE FOR ANY DIRECT AND INDIRECT RESULT FROM THIS ARTICLE. THIS IS ONLY A
KNOWLEDGE SHARING INITIATIVE.
THE AUTHOR – CS DEEPAK
SETH (ASSOCIATE PARTNER HELPINGHANDS PROFESSIONALS LLP) AND CAN BE REACHED AT CONTACTHHPRO@GMAIL.COM
OR 9910248911.
0 Comments