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 SaleAllotment and issue of shares98. Redeemable preference shares |
| 1) | Subject to the provisions of this section, a company having a share capital, if so authorised by its articles, may issue preference shares which are, or at the option of the company are liable, to be redeemed: Provided that- |
| a) | no such shares shall be redeemed except out of profits of the company which would otherwise be available for dividends or out of the proceeds of a fresh issue of shares made for the purposes of the redemption; |
| b) | where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall, out of profits which would otherwise have been available for dividends, be transferred to a reserve fund, to be called the "capital redemption reserve fund", a sum equal to the nominal amount of the shares redeemed, or if shares of no par value, to the book value of the shares redeemed, and the provisions of this Act relating to the share capital of a company shall, except as provided in this section, apply as if the capital redemption reserve fund were share capital of the company; |
| c) | no such shares shall be redeemed unless and until the premium, if any, payable on redemption, has been provided for out of the profits of the company or out of the company's share premium account; |
| d) | the redemption of such shares shall be effected on such terms and in such manner as shall be provided by the articles of the company. |
| 2) | Where in pursuance of this section a company has redeemed or is about to redeem any preference shares, it shall have power to issue shares (including, if the company so decides by special resolution, shares other than redeemable preference shares) up to the nominal amount of the shares redeemed or to be redeemed or in the case of preference shares of no par value, up to the book value of the shares redeemed or to be redeemed, as if those shares had never been issued, and the share capital of the company or the number of shares of no par value shall not for the purposes of section 75(3) be deemed to be increased by the issue of shares in pursuance of this subsection. |
| 3) | The redemption of redeemable preference shares shall not be deemed to constitute a reduction of a company's authorised share capital. |
| 4) | The capital redemption reserve fund may, notwithstanding anything in this section contained, be applied by the company in paying up unissued shares of the company to be issued to members of the company as fully paid-up capitalisation shares or for the payment of the premium over the par value in the case of an acquisition of shares in terms of section 85. |
| 5) |
| a) | If a company has redeemed any redeemable preference shares, it shall within one month thereafter give notice thereof in the prescribed form to the Registrar specifying the shares so redeemed. |
| b) | If default is made in complying with the provisions of paragraph (a), the company shall be guilty of an offence. |
| 6) | For purposes of subsections (1) and (2) "book value" in respect of preference shares of no par value, means that part of the stated capital contributed by the preference shares redeemed or to be redeemed. |
| 7) | This section shall also apply in respect of any balance of any capital redemption reserve fund created by a company prior to 1 January 1974. |