Companies Act, 1973 (Act No. 61 of 1973)

Chapter V: Share capital, Acquisition by Companies of own Shares, Shares, Allotment and Issue of Shares, Members and Register of Members, Debentures, Transfers, and Restrictions on Offering Shares for Sale

Share capital

79. Payment of interest out of capital in certain cases
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1)Where any shares of a company are issued for the purpose of raising money to defray the expenses of the construction of works or buildings or for the provision of plant, which cannot be made profitable for a lengthy period, the company may pay interest on the share capital for the period and subject to the conditions and restrictions in this section mentioned, and may charge the same to capital as part of the cost of construction of the works or buildings or the provision of plant.

 

2)
a)No such payment shall be made under subsection (1) unless it is authorised by the articles or by special resolution of the company, and the approval of the Minister has first been had and obtained.
b)The Minister may, before approving any such payment, at the expense of the company, appoint a person to enquire into and report to him on the circumstances of the case, and may before making the appointment require the company to give sufficient security for the payment of the costs of the enquiry.
c)Any such payment shall be made only for such period as may be determined by the Minister and such period shall in no case extend beyond the close of the half-year next after the half-year during which the works or buildings have been actually completed or the plant provided.
d)The rate of interest shall in no case exceed six per cent per annum or such lower rate as may for the time being be determined by the Minister.
e)The payment of the interest shall not operate as a reduction of the amount paid up on the shares in respect of which it is paid.

 

3)For the purposes of subsection (2) (c) the expression "half-year" in relation to a company, means the period of six months commencing on the first or ending on the last day of the financial year of that company.