Multiple choice

Which of the following can be utilised for redemption of preference shares?

  1. The proceeds of fresh issue of equity shares

  2. The proceeds of issue of debentures

  3. The proceeds of issue of fixed deposit

  4. The sale proceeds of investments
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As per Section 55 of the Companies Act, 2013 Preference Shares can be redeemed out of fresh issue of equity shares or out of profits. However, where any such shares are redeemed, otherwise than out of the proceeds of a fresh issue, there shall, out of profits which would otherwise have been available for dividends, be transferred to Capital Redemption Reserve Account, a sum equal to the nominal amount of the shares redeemed.

Keep practicing — related questions