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The decision to issuance of those shares may include giving the established right to shares issued by any repurchase the call, and in return to get pregnant on the amount of more than nominal value, and this represents the right feature for the company as it can take advantage of lower interest rates in the market, so to get rid of preferred stock that previously issued, and replace it with a low coupon bonds or shares of an excellent, low-profit rate.
If the preference shares all these advantages, it is not without flaws, and the first thing that is noteworthy in this regard is the relatively high cost, cost of financing preference shares outweigh the cost of borrowing. This is due to the dividend preference shares, unlike Alfoaúd- not subject to tax, and then the company does not check from behind, and tax savings, In addition, the preferred stock campaign being greater than those faced by lenders and then demanding a higher return rate of risk. For unlike lenders, there is no guarantee for excellent shareholder return on the League, and that in the case of bankruptcy liquidation and distribution of preferred stock funds campaign comes in second place.
Also maligned the mandatory preferred stock dividends, it is not really a campaign to claim their share of these shares in the profits, but if the administration decided to make distributions, but they reserve the right in the future to get their dues from the profits of the years in which the distribution has not been
The sources are
1. Conversion into ordinary shares
2. Redemption by the issuance of new ordinary shares
3. redemption by the issuance of new bonds or funds like that.
4. by way of loan from banks
according to my opion
a) Redemption of preference shares means paying back (or repayment to) preference shareholders their money.Section80 of the Companies Act permits a company, limited by shares, to issue redeemablepreference shares if it is so authorised by its articles of association.b) Preference shares may be redeemed either on a specific date which is the maturity date printed on thepreference shares certificate or these shares may be redeemed earlier at the option of the company.c) However the redemption period cannot exceed20 years from the date of issue of such shares as provided inSub-section5A of Section80.d) The company thus enjoys the flexibility in redemption of the preference shares within the maximum specifiedperiod of20 years.e) The Companies Act has abolished the category of irredeemable preference shares with effect from1-3-1997 as a result of the Companies (Amendment) Act1996. (80A)f) Redemption of preference shares involves repayment of capital before paying creditors of the company. Itmay affect the interest of creditors.g) In addition to that the working capital of the company will be depleted as a result of outflow of cash due toredemption.h) Amount of the capital redemption reserve account will not be available for distribution of dividend.i) Preferred stock/ preferred shares or preference sharesj) (w.e.f1/3/97, no preference chares can be issued which are not redeemed within20 years)k) Convert partly paid shares into fully paid shares:l) Source for redemption should be out of undistributed profit/ distributable profit(otherwise available fordividend ,) or out of PROCEEDS of fresh issue of shares or bothm) Premium on redemption of pref shares should be should be provided out of securities premium or capitalreserve in cash (i.e profit on revaluation not to be considered) or profit and loss account or general reserveaccount.n) The amount of capital redemption reserve But only for bonus shares issueo) CRR- If the shares are redeemed out of undistributed profit , the nominal value of share capital, soredeemed should be transferred to Capital Redemption Reserve Account.p) The redemption of preference shares under this section by a company shall not be taken as reducing theamount of its authorized share capitalPROCESS FOR REDEMPTION:Make PSfully paidand passentry forSale ofAsset/bankLoanMake New Issueentry if requiredand arrange forcash if requiredCreate CRRW/o Premiumon sharesMake Paymentof Pref SharesIssue Bonus
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