XIII-2
1. Verify the following points before taking the decision of redeeming redeemable preference shares:--
i)
They
must be redeemed only out of distributable profits of the company or out of the
proceeds of a fresh issue of shares, made for the purpose of redemption.
ii)
They
must be fully paid up.
iii)
The
premium, if any, on such redemption, must be provided out of the profits or out
of the share premium account of the company, before the shares are redeemed.
iv)
If
they are redeemed out of distributable profits of the company, then, before
such redemption, a sum equal to the nominal amount of shares to be so redeemed
must be transferred to a reserve fund called the “Capital Redemption Reserve
Account” from the distributable profits of the company.
2.
Hold
a Board Meeting and decide about the number of preference shares to be
redeemed, the rate of premium, if any, and the date of such redemption.
3. As soon
as the decision is taken, pass a resolution in the same Board Meeting approving
the redemption of redeemable preference shares.
4.
If the redemption is to be made out of the
proceeds of a fresh issue of shares, then:--
i)
Hold
a Board Meeting and approve the issue of fresh shares up to the nominal amount
of the shares to be redeemed by passing a resolution;
ii)
Pass
another resolution in the same Board Meeting approving the redemption of
preference shares out of the proceeds of a fresh issue of shares;
iii)
Pass
another Board resolution to issue fresh shares to the existing share holders;
iv)
Redeem
the preference shares within one month of the issue of the new shares.
5.
Carry
out the redemption of preference shares in both the cases on such terms and in
such manner as provided in the Articles of your company.
6.
If
the Articles are silent on this aspect, then follow Regulation 2 of Table A of
Schedule I to the Act.
7.
If
your company’s shares are listed on a recognized Stock Exchange, inform it
about such redemption and forward a copy of the Board resolution to them.