CS Executive · Company Law and Practice · Share and Share Capital - Concepts
Rohan Steels Ltd is unable to redeem its preference shares of Rs 40 lakh and pay the dividend due on them as per the terms of issue. It proposes to issue fresh redeemable preference shares equal to the amount due, including dividend, and treat the old shares as redeemed. Which statement is correct under section 55?
The company needs consent of holders of three-fourths in value of the unredeemed preference shares and approval of the Tribunal on its petition. The issue of further redeemable preference shares is not deemed an increase, and the redemption is not deemed a reduction, of share capital.
- AConsent of holders of two-thirds in value and Tribunal approval are needed, and the issue counts as an increase in share capital
- BOnly a board resolution is needed, and the issue counts as a reduction of capital
- CConsent of holders of three-fourths in value and Tribunal approval are needed, and the issue is not treated as an increase or reduction of share capitalCorrect
- DConsent of holders of three-fourths in value is enough, and no Tribunal approval is needed
Explanation
Section 55(3) requires consent of holders of three-fourths in value of the unredeemed preference shares and Tribunal approval on the company's petition. The Explanation says such further issue or redemption is not deemed an increase or reduction of share capital. The Tribunal also orders forthwith redemption of shares held by non-consenting holders.
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