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CS Executive · Company Law and Practice · Share and Share Capital - Concepts

Ananya Infra Ltd, a company limited by shares, wants to issue preference shares. Which proposal is permitted under section 55 of the Companies Act, 2013?

The permitted proposal is redeemable preference shares, authorised by the articles, redeemable within twenty years from issue. Irredeemable preference shares are prohibited, a longer term is allowed only for infrastructure projects, and only fully paid shares may be redeemed.

  1. AIrredeemable preference shares, if approved by a special resolution
  2. BPreference shares redeemable after 25 years for a non-infrastructure project
  3. CRedeemable preference shares, if authorised by articles, with redemption within twenty years of issueCorrect
  4. DPreference shares redeemable even if only partly paid, with redemption from any reserves

Explanation

Section 55 bars irredeemable preference shares and allows redeemable ones if authorised by the articles, redeemable within twenty years of issue. A longer period is allowed only for infrastructure projects. Redemption needs fully paid shares and must be from distributable profits or a fresh issue, so the partly paid option is wrong.

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