Please reply to this
RAJESH CHOUDHARY
(Querist) 29 November 2011
This query is : Resolved
A Closely held Public Ltd. co. has decided to redeem Preference shares in Board Meeting held in APRIL 2011 from the proceeds of New issue of Equity Shares. In the same meeting Board has decided to issue new Equity shares. The Co. has taken the Equity Share Application money in MAY 2011 and from that amount paid the preference shareholders, while the allotment of equity shares to the shareholders has been done in SEPTEMBER 2011.
What would be the implication in this case where Fresh Issue of Equity shares (i.e. allotment of Equity shares) is done after making payment to the preference shareholders-
1. Is it a invalid redemption of Preference shares??
OR
2. The Preference shares would be deemed to have been redeemed OUT OF PROFITS ??
Raj Kumar Makkad
(Expert) 29 November 2011
This is invalid redemption of preference shares on the part of company.
