>> June 30, 2010
When the preference shares are issued with the stipulation that these shares are to be redeemed after a certain period of time, then such preference shares are known as redeemable preference shares.
According to section 100 of Indian Company Law. " If a company collects the money through redeemable preference shares, this money must be returned on its maturity whether company is liquidated or not. Section 80 describes the following provisions relating to redeemable preference shares :
1 # Its repayment will be out of net profit of company or amount received through
issuing of new shares. These shares will never be redeemed by the amount of new issue of debentures of company. It means, we can not use loan for repayment of preference share capital. Company also can not use the sale amount of any asset for redemption of redeemable preference shares.
2. # Capital reserves from forfeiture of shares and share premium account are not available for payment to redeemable preference shareholders.
3. # No such shares shall be redeemed unless they are fully paid. Only fully redeemable shares will be redeemed.