Pursuant to section 72(5), where preference shares are redeemed out of profits or capital of the company, the company would be required to transfer, out of profits, an equivalent amount into the share capital of the company.
Preference shares can be redeemed only if these are fully paid i.e partly paid shares must become fully paid before redemption.
Any redemptions can be paid out of the company’s capital using proceeds from a fresh issue of shares. The directors must lodge a solvency statement with ACRA under the “Notice of Redemption of Redeemable Preference Shares” transaction via BizFile+.
Basic Procedure for Transfer of Share in a Private Company
- Transferor should give a notice in writing for his intention to transfer his share to the company.
- The company in turn should notify to other members as regards the availability of shares and the price at which such share would be available to them.
Issuing redeemable preferential shares provides the company with an option to choose between whether to repurchase shares or redeem shares depending on the market condition. The company redeems shares when it decides to pay back the shareholders. It is a way of paying the shareholders similar to paying dividends.
a) Company may redeem its preference shares only on the terms on which they were issued or as varied after due approval of preference shareholders under section 48 of the Act. The preference shares may be redeemed: at a fixed time or on the happening of a particular event; any time at the companys option; or.
The sources for redemption come from two sources – Fresh issue of shares and Profit of the Company. When redemption is out of fresh issue, the amount received on fresh issue is utilised for the redemption of preference shares.
As already seen above the paid up share capital is an amount received as paid-up in respect of shares issued by the company. Hence, in this manner as well the Preference share Capital (whether convertible or not) is part of Paid up Share Capital and hence part of Networth of the company.
Non-convertible preference shares are not convertible into equity shares of the company but still have preferential rights to payment of capital in the event of winding up of the company.
(b) Conversion Ratio. The fully paid Series A Preference Shares are convertible into fully paid Ordinary Shares at the rate of one Ordinary Share for every 10 Series A Preference Shares (the “Conversion Ratio”). A holder of Series A Preference Shares shall not be entitled to receive any fractions of an Ordinary Share.
You may see it referred to as form J30 or a share transfer form, but it means the same thing. The person selling the shares (often called the ‘transferor’) should complete their details on the stock transfer form, including their name and address as well as identifying the shares to be transferred, and then sign it.
According to section 62(1)(c) of the Act, a company can issue shares to any persons, if it is authorised by a special resolution, either for cash or for consideration other than cash, if the price of such shares is determined by the valuation report and any other conditions as may be prescribed.
29 May 2020 In case of transfer of unquoted shares by a person at value lesser than fair market value as defined in above rule 11UA (1)(c)(b) and 11UA (1)(c)(c), the fair market value as defined in these rules shall be considered as sale consideration for such transaction.