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

Ganga Metals Ltd, a company limited by shares, has issued shares carrying a preferential right to dividend at a fixed rate. Which further feature is also required by Section 43 for such shares to be preference capital, as the definition is framed?

The shares must also carry a preferential right to repayment of the paid-up capital on winding up or repayment of capital. Section 43 defines preference capital by both the preferential fixed dividend and this preferential repayment right; a fixed premium is not required.

  1. AA preferential right to repayment of paid-up capital on winding up or repayment of capitalCorrect
  2. BA right to vote on every resolution
  3. CA right to convert into equity shares after one year
  4. DA guarantee of redemption at a premium

Explanation

Section 43 Explanation (ii) describes preference capital as carrying a preferential right to dividend at a fixed amount or rate and a preferential right to repayment of paid-up capital on winding up or repayment of capital. A premium on repayment is not essential, and voting or conversion rights are not part of the definition.

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