After redemption of a preference share the capital should remain in take how
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Redemption of preference shares
Section 55 of the Companies Act, 2013 (the Act) prescribes that a company shall not issue an irredeemable preference shares. Further, it also imposes restriction on companies limited by shares to issue preference shares liable to be redeemed at the end of the end of twenty years.
REDEMPTION OF PREFERENCE SHARES
Section 55 of the Companies Act, 2013 (the Act) prescribes that a company shall not issue an irredeemable preference shares. Further, it also imposes restriction on companies limited by shares to issue preference shares liable to be redeemed at the end of the end of twenty years. However, 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 more than thirty years, subject to the redemption of a minimum ten percent of such preference shares from the twenty first year on wards on an annual basis at the option of such preferential shareholders.
In terms of the provisions of Section 55 (2) of the Act, redeemable preference 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.
A Company must have either sufficient profits by way of surplus/ accumulated profits or general reserve or any other free reserve to redeem its preference shares out of profits. In other case, where there is no profit or inadequate profit, a company may issue fresh issue of shares. However, a company may issue share to redeem its preference shares, even it is having sufficient profit