Coupon Accepted Successfully!


Conditions of redemption sec. 80

(i)         Such shares must be fully paid up.

(ii)        Such shares can be redeemed out of distributable profits (i.e., profits which would otherwise be available for dividends) or out of the proceeds of a fresh issue of shares made for the purpose of redemption.

(iii)      Any premium payable on redemption of such shares shall be provided from out of the profits or out of the company’s security premium account.

(iv)      Where the shares are redeemed out of distributable profits, the face value of the shares redeemed must be transferred to the capital redemption reserve account out of the profits otherwise available for distribution as dividend (i.e., distributable profits).

(v)       The amount credited to capital redemption reserve account may be utilized by the company by way of issue of fully paid bonus shares which will not be treated as reduction of capital. Thus capital redemption reserve account can not be applied for making partly paid shares as fully paid.



It would not be desirable to use the general reserve of the company for the purpose of redeeming the preference shares as long as there is a balance in the profit and loss account. No Redemption unless the Redeemable Preference Shares are Fully Paid.
(i)     If the redeemable preference shares are given as partly paid up and no instruction is given, it should be presumed that they have been made fully paid up before redemption.

(ii)    In case there are two categories of redeemable preference shares in the instruction to the contrary, then only fully paid redeemable preference shares should be redeemed.



In short proceeds of fresh issue of shares means :

The nominal value of the shares when shares are issued at par.

The nominal value of the shares when shares are issued at a premium. The amount of premium cannot be used for redemption in view of restrictions imposed by Section 78.

The net amount realized when the shares are issued at a discount.

Test Your Skills Now!
Take a Quiz now
Reviewer Name