Question

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

• A. The proceeds of fresh issue of equity shares.
• B. The proceeds of issue of debentures.
• C. The proceeds of issue of fixed deposit.
• D. The sale proceeds of investments.

Answer 1

The correct option is A The proceeds of fresh issue of equity shares.

As per Sec 80 of the Companies Act, preference shares can only be redeemed out of profits of the company which would otherwise be available for dividend or out of the proceeds of a fresh issue of shares made for the purpose of redemption.