(1)

A company having a share capital may, if so authorised by its articles, issue preference shares subject to the following conditions, namely:-

(a) the issue of such shares has been authorised by passing a special resolution in the general meeting of the company

(b) the company, at the time of such issue of preference shares, has no subsisting default in the redemption of preference shares issued either before or after the commencement of this Act or in payment of dividend due on any preference shares.

(2)

A company issuing preference shares shall set out in the resolution, particulars in respect of the following matters relating to such shares, namely:-

(a) the priority with respect to payment of dividend or repayment of capital vis-a-vis equity shares;

(b) the participation in surplus fund;

(c) the participation in surplus assets and profits, on winding-up which may remain after the entire capital has been repaid;

(d) the payment of dividend on cumulative or non-cumulative basis.

(e) the conversion of preference shares into equity shares.

(f) the voting rights;

(g) the redemption of preference shares.

(3)

The explanatory statement to be annexed to the notice of the general meeting pursuant to section 102 shall, inter-alia, provide the complete material facts concerned with and relevant to the issue of such shares, including-

(a) the size of the issue and number of preference shares to be issued and nominal value of each share;

(b) the nature of such shares i.e. cumulative or non-cumulative, participating or non-participating , convertible or non-convertible

(c) the objectives of the issue;

(d) the manner of issue of shares;

(e) the price at which such shares are proposed to be issued;

(f) the basis on which the price has been arrived at;

(g) the terms of issue, including terms and rate of dividend on each share, etc.;

(h) the terms of redemption, including the tenure of redemption, redemption of shares at premium and if the preference shares are convertible, the terms of conversion;

(i) the manner and modes of redemption;

(j) the current shareholding pattern of the company;

(k) the expected dilution in equity share capital upon conversion of preference shares.

(4)

Where a company issues preference shares, the Register of Members maintained under section 88 shall contain the particulars in respect of such preference share holder(s).

(5)

A company intending to list its preference shares on a recognized stock exchange shall issue such shares in accordance with the regulations made by the Securities and Exchange Board of India in this behalf.

(6)

A company may redeem its preference shares only on the terms on which they were issued or as varied after due approval of preference shareholders under section 48 of the Act and the preference shares may be redeemed:-

(a) at a fixed time or on the happening of a particular event;

(b) any time at the company's option; or

(c) any time at the shareholder's option.