1 / 9

Redemption of preference shares II

Redemption of preference shares II. The general process. Statutory requirements. Sect 61 Co Act 1965: …redemption not taken as reducing the amount of authorised capital …redeemed …out of profits otherwise available for dividends out of proceeds of fresh issue of shares….

ada
Download Presentation

Redemption of preference shares II

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Redemption of preference shares II The general process

  2. Statutory requirements Sect 61 Co Act 1965: • …redemption not taken as reducing the amount of authorised capital • …redeemed • …out of profits otherwise available for dividends • out of proceeds of fresh issue of shares…

  3. Statutory requirements Sect 61 Co Act 1965: (contd.) • if other than (b)ii, an amout out of profits otherwise available for dividends to a “capital redemption reserve” {CRR} • premium on redemption if any, payable out of profits or share premium account • shares fully paid up before redemption

  4. Maintaining capital structure Issued and paid-up capital RM Ordinary shares of RM1 each 100,000 Preference shares of RM1 each 100,000 ********************************** Issued and paid-up capital RM Ordinary shares of RM1 each 100,000 Preference shares of RM1 each -

  5. Sect 61: b(i) Issued and paid-up capital RM Ordinary shares of RM1 each 200,000 Preference shares of RM1 each - ********************************** Sect 61:b(ii), c Issued and paid-up capital RM Ordinary shares of RM1 each 100,000 Preference shares of RM1 each - Capital Redemption Reserve 100,000

  6. Financing the redemption Options: • Issue of new ordinary shares [for redemption purpose] at least equal to the nominal value of the shares redeemed. • Transfer profits otherwise available for dividends to “capital redemption reserve”at least equal to the nominal value of the shares redeemed. • Combination of 1 and 2,where the total should at least equal to the nominal value of the shares redeemed.

  7. The general process • Transfer of shares to Redemption of Preference Shares account – close the capital account. Dt. Preference Shares a/c Cr. Redemption of preference shares a/c 2. Make payment to shareholders Dt. Redemption of preference shares a/c Cr. Bank a/c

  8. The general process • Show how the redemption is financed nominal shares: Dt. Bank a/c Cr. OSC a/c OR profits: Dt. Ret. profits/earnings a/c Cr. CRR a/c OR

  9. both: Dt. Bank a/c Cr. OSC a/c AND Dt. Ret. earnings/profits a/c Cr. CRR a/c premium Dt. Share premium a/c Cr. Ret. Profits a/c

More Related