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

Lotus Retail Ltd is unable to redeem its preference shares on the due date. It plans to issue fresh redeemable preference shares equal to the amount due, including dividend, so that the old shares are deemed redeemed. Under Section 55(3), which condition must be met?

The company needs the consent of holders of three-fourths in value of the unredeemed preference shares and the approval of the Tribunal on its petition. On such approval, the further redeemable preference shares may be issued and the old shares are deemed redeemed, while dissenting holders are redeemed forthwith.

  1. AConsent of holders of a simple majority in number of the preference shares and registration with the Registrar only
  2. BConsent of holders of three-fourths in value of such preference shares and approval of the TribunalCorrect
  3. CApproval of equity shareholders by ordinary resolution without Tribunal approval
  4. DConsent of all preference shareholders without any Tribunal approval

Explanation

Section 55(3) requires the consent of holders of three-fourths in value of the unredeemed preference shares and the approval of the Tribunal on the company's petition. The Tribunal must order forthwith redemption of shares held by non-consenting holders. A simple majority or equity approval alone is insufficient, and unanimity is not required.

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