S.L. 234.42 Art. 31Redeemable preference shares.

(1) Where a company, duly authorised by its memorandum or articles, issues preference shares which are to be redeemed or are liable to be redeemed at the option of the company or the shareholder -

(a) no such shares shall be redeemed except out of the profits of the company which would otherwise be available for dividend or, in accordance with subregulation (4), out of the proceeds of a fresh issue of shares made for the purpose of the redemption;

(b) no such shares shall be issued unless the following conditions are satisfied as regards the terms and manner of redemption -

(i) the date on or by which, or dates between which, the shares are to be or may be redeemed must be specified in the company’s memorandum or articles or, if the memorandum or articles so provide, fixed by the directors, and in the latter case the date or dates must be fixed before the shares are issued;

(ii) any other circumstances in which the shares are to be or may be redeemed must be specified in the company’s memorandum or articles;

(iii) the amount payable on redemption must be specified in, or determined in accordance with, the company’s memorandum or articles, and in the latter case the memorandum or articles must not provide for the amount to be determined by reference to any person’s discretion or opinion; and

(iv) any other terms and conditions of redemption shall be specified in the company’s memorandum or articles;

(c) no such shares shall be redeemed unless they are fully paid up and the terms of redemption shall require full payment on redemption;

(d) the premium, if any, payable on redemption shall have been provided for out of the profits of the company or out of the company’s share premium account before the shares are redeemed;

(e) 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 distribution as dividend, be transferred to a reserve to be called "the capital redemption reserve", a sum equal to the nominal amount of the shares redeemed, and the provisions of these regulations relating to the reduction of the issued share capital of a company shall, except as provided in this regulation, apply as if the capital redemption reserve were paid up share capital of the company.

(2) The capital redemption reserve may, notwithstanding anything contained in this regulation, be applied by the company in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares.

(3) Preference shares redeemed under this regulation shall be treated as cancelled on redemption, and the amount of the company’s issued share capital shall be diminished by the nominal value of those shares accordingly: Provided that a redemption of preference shares by a company shall not be taken as reducing the amount of the company’s authorised share capital.

(4) Without prejudice to the provisions of subregulation (3), where a company is about to redeem preference shares, it shall have the power to issue shares up to the nominal value of the preference shares to be redeemed as if those preference shares had never been issued.

(5) A notice of the redemption of preference shares referred to in the preceding paragraphs of this regulation shall be delivered by the company to the Registrar for registration, within fourteen days after the date of redemption.

(6) If default is made in complying with the provisions of subregulation (5) every officer of the company who is in default shall be liable to a penalty, and, for every day during which the default continues, to a further penalty.