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Provisions of The Companies Act, 1956

According to Section 80 of The Companies Act, 1956 the redemption of preference shares are subject to the following conditions:

  • Preference shares can be redeemed only if they are fully paid up. It means, partly paid up preference shares cannot be redeemed
  • Preference shares can be redeemed only either out of divisible profits or out of fresh issue of shares made for the purpose of redemption
  • Premium, if any, payable on redemption of preference shares must be provided out of either Securities Premium account or profits
  • When preference shares are redeemed out of divisible profits, an amount equal to the nominal value of shares so redeemed must be transferred to Capital Redemption Reserve (CRR), out of divisible profits





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