Redemption of Preference Shares
Redemption of Preference Shares
The fund provided by the owners in to a business is known as capital. You know that capital of the business depends upon the form of business organization. From ownership point of view, there are number of business organizations like, sole proprietorship business, partnership business, cooperative societies, joint stock companies etc. Total capital of the company is divided into a number of small units of fixed amount and each such unit is called a share. The fixed value of a share register with the registrar of Companies is called face/ nominal value. However, a company can issue shares at a price different from its nominal value or face value. As the total capital of the company is divided into shares, the capital of the company is known as share capital. A company can issue two types shares equity shares and preference shares. The issue of preference shares is one of the important sources of capital of a company. Redemption is the process of repaying an obligation at predetermined amounts and timings. The redeemable preference shares are issued on the terms that share holders will at a future date be repaid amount which they invested in the company. According to the Companies Act, 1956, a company can issue only redeemable shares i.e. at present a company cannot issue irredeemable preference shares
|1.2 Types of Preference Shares |
In previous sections we have discussed different sources of capital. Equity shares get dividend at a rate fixed at the Annual General Meeting (AGM) depending on the profit available for a particular year. The rate of dividend also varies from year to year. The preference shareholders contribute capital to the company. According to section 85 of the Companies Act, 1956, persons holding preference shares, called preference shareholders. They are assured of a preferential dividend at a fixed rate during the life of the company. This type share holders carry
The fund provided by the owners in to a business is known as capital. You know that capital of the business depends upon the form of business organization. From ownership point of view, there are number of business organizations like, sole proprietorship business, partnership business, cooperative societies, joint stock companies etc. Total capital of the company is divided into a number of small units of fixed amount and each such unit is called a share. The fixed value of a share register with the registrar of Companies is called face/ nominal value. However, a company can issue shares at a price different from its nominal value or face value. As the total capital of the company is divided into shares, the capital of the company is known as share capital. A company can issue two types shares equity shares and preference shares. The issue of preference shares is one of the important sources of capital of a company. Redemption is the process of repaying an obligation at predetermined amounts and timings. The redeemable preference shares are issued on the terms that share holders will at a future date be repaid amount which they invested in the company. According to the Companies Act, 1956, a company can issue only redeemable shares i.e. at present a company cannot issue irredeemable preference shares
|1.2 Types of Preference Shares |
In previous sections we have discussed different sources of capital. Equity shares get dividend at a rate fixed at the Annual General Meeting (AGM) depending on the profit available for a particular year. The rate of dividend also varies from year to year. The preference shareholders contribute capital to the company. According to section 85 of the Companies Act, 1956, persons holding preference shares, called preference shareholders. They are assured of a preferential dividend at a fixed rate during the life of the company. This type share holders carry