Learn All About Issue of Preference Shares

Preference Shares are the type of shares issued by a company, providing fixed annual dividends to the shareholders, written on the deed of preference shares like 10% Preference shares, here 10% means that the shareholders will be getting an annual dividend at 105 of the face value marked on the shares.

The company can Issue Preference Shares, after passing a resolution in the general meeting of the company regarding the changes to be made in the Article of Association of the company.

Key Points to Remember:

• Only a share-limited company can issue.
  
• The provision of issuing preference shares should be in the Articles of Association.
  
• Redeemable within 20 years of issue, generally.
  

Steps to Issue Preference Shares

• Call a Meeting
  

Call a meeting of the directors, giving a minimum 7 days notice, stating date, time, place and agenda of the meeting beforehand.

• Draft a Resolution
  

You have to prepare a draft of the resolution stating all the details of the issue like voting rights, dividends, payment process, redemption, etc.

• Draft a Statement to Resolution
  

After drafting the resolution, prepare an informative statement related to the provisions listed in the ‘resolution drafted like size, number, value, price of shares, the objective and manner of issue, terms of issue and redemption, type of share, etc.

• Conduct the Board Meeting
  

The next step is to conduct the meeting of the board of directors the date specified earlier in the notice and pass the special resolution.

• Filing Form MGT-14
  

After the board of directors passes the resolution in the meeting, you have to get the resolution filed to the Registrar of Companies under Form MGT-14 under the Companies Act, 201 within 30days from the meeting.

The From must contain the copies of the special resolution passed along with the explanatory statement. The form must be signed Managing Director or Secretary appointed by the Board. Additionally, the form should contain a digital signature of a CA, Cost Accountant or CS.