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CS Executive · Corporate Accounting and Financial Management · Accounting for Share Capital

If a company is unable to redeem preference shares or pay dividend on them per the terms of issue, which course does Section 55(3) allow?

The company may issue further redeemable preference shares equal to the amount due, including dividend, with consent of holders of three-fourths in value and approval of the Tribunal. On that issue the unredeemed preference shares are deemed to have been redeemed.

  1. AIssue further redeemable preference shares with consent of holders of three-fourths in value and Tribunal approval, deeming the old shares redeemedCorrect
  2. BConvert the shares into equity shares by a Board resolution alone
  3. CExtend redemption indefinitely by an ordinary resolution
  4. DCancel the shares without any payment to holders

Explanation

Section 55(3) permits issue of further redeemable preference shares equal to the amount due including dividend, with consent of holders of three-fourths in value and Tribunal approval. The unredeemed shares are then deemed redeemed. The Tribunal orders forthwith redemption of shares held by non-consenting holders.

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