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Variation in the terms of Preference Shares

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Variation in the terms of Preference Shares

Postby deepika bhardwaj » Tue Jan 05, 2010 3:37 pm

Dear Professionals

A Company had issued Cumulative Redeemable Preference Shares redeemable after 10 years. After the expiry of nine years, the Company wishes to make them Preference Shares Convertible into equity shares by changing the terms of issue.

Can the Company change the terms of Preference shares? Please guide if section 106 is applicable in this case and what is the procedure for the same.

With best regards
CS. Deepika Bhardwaj
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Re: Variation in the terms of Preference Shares

Postby pca » Tue Jan 05, 2010 5:00 pm

Yes, it can be changed by taking consent of preference shareholders as provided in Sec.106 and compliance of Sec.81. Also ensure that sufficient balance is available in authorised capital to take care of conversion of preference into equity.
PC Agrawal
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Re: Variation in the terms of Preference Shares

Postby deepika bhardwaj » Wed Jan 06, 2010 11:42 am

Please clarify if Section 81 would be applicable at the time of conversion of Preference shares or at the time of change in the terms.

what would be the procedure in this case.

with best regards
CS. Deepika Bhardwaj
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Re: Variation in the terms of Preference Shares

Postby murthy1951 » Wed Jan 06, 2010 2:26 pm

In my view, section 81 resolution requires to be passed by a public limited company before the right to claim equity share arises. Therefore, simultaneous with the class meeting under sec. 106 for consent from the preference shares, hold the general meeting and pass sec. 81 resolution though the actual process may come after some time gap. You can also take it that you should do the conversion within 12 months of passing sec. 81 resolution as required by the Unlisted Public Companies Preferential Allotment Rules, 2003. Therefore, ensure that you are within this time frame.
T.R. Ramamurthy
Ramamurthy Associates,
G-156/F-2, Dilshad Colony,
Delhi 110095
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