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Share premium is used for many purposes and 1 of them is redemption of preference shares and debentures
A redeemable preference share is issued on the terms where they are liable to be redeemed at either a fixed time, or the company's option or at the shareholders option. Non-redeemable or Irredeemable preference shares need not be repaid by the company except on winding up of the company. According to Section 100 of the Companies Act, 1956 : If a company collects the money through redeemable preference shares, this money must be returned on its maturity whether company is liquidated or not. Section 80 of the Companies Act, 1956 lays down some provisions relating to redeemable preference shares : 1. The shares to be redeemed must be fully paid-up. 2. Capital reserves from forfeiture of shares and share premium account are not available for payment of redeemable preference share holders. 3. Its payment will be out of the net profit of the company or amount received on issue of new shares. Company cannot sale amount of asset for redemption of redeemable preference shares.
Preference shares are shares whose dividends are paid out first before ordinary shares dividends. They so called (preference shares) because they have 'preference' over ordinary shares for payment of dividends.
i want 2 convert the equity shares of my cmpany into preference shares
No, According to sec 80 of Co. Act 1956, Before redemption of Pref Share they must full paid first, if there is partly paid then convert it into fully paid shares
Share premium is used for many purposes and 1 of them is redemption of preference shares and debentures
Preference shares are paid to shareholders before common stock dividends are paid out. Share premium can not be distributed, however, but under certain circumstances can be reduced.
A redeemable preference share is issued on the terms where they are liable to be redeemed at either a fixed time, or the company's option or at the shareholders option. Non-redeemable or Irredeemable preference shares need not be repaid by the company except on winding up of the company. According to Section 100 of the Companies Act, 1956 : If a company collects the money through redeemable preference shares, this money must be returned on its maturity whether company is liquidated or not. Section 80 of the Companies Act, 1956 lays down some provisions relating to redeemable preference shares : 1. The shares to be redeemed must be fully paid-up. 2. Capital reserves from forfeiture of shares and share premium account are not available for payment of redeemable preference share holders. 3. Its payment will be out of the net profit of the company or amount received on issue of new shares. Company cannot sale amount of asset for redemption of redeemable preference shares.
Preference shares are shares whose dividends are paid out first before ordinary shares dividends. They so called (preference shares) because they have 'preference' over ordinary shares for payment of dividends.
i want 2 convert the equity shares of my cmpany into preference shares
it is a preference shares which willbe converted compulsory into equity shares after a stipulated time
Lets understand meaning of Preference Share in Layman language. As name suggest preference shares are those kind of shares which has preference in payment of dividend, and price of shares over equity shares. If company earn net profit, then first return to preference shareholders are given at first, and then to equity shareholders.
in case of non convertible preference shares, the holders are not given the right to convert their shares into equity shares.
No, According to sec 80 of Co. Act 1956, Before redemption of Pref Share they must full paid first, if there is partly paid then convert it into fully paid shares
The cost of Preference Capital may be defined as the dividend expected by the preference Shareholders. There are two types of Preference Shares:- 1. Irredeemable 2. Redeemable The first category is a kind of continuous security in the sense that the principal is not to be returned for a long time or is likely to be available till the life of the company. The redeemable preference Shares are issued with a Maturity date so that the Principal will be repaid at some future date. Accordingly, the Cost of Preference Shares is calculated separately for these 2 situations.
One of the limitations to preference shares is that the shareholder does not have a voting right. Preference shares normally pay a fixed dividend where common stocks do not pay a fixed dividend.
Kp (cost of pref. share) = Annual dividend of preference shares Market price of the preference stock