Companies Act, 2006

65. Preference Shares: (1) A company may issue preference shares as provided in this Act, the memorandum, or the articles of association.

(2) Shares issued pursuant to subsection (1) shall not be convertible into ordinary shares except as provided in the articles of association.

(3) When issuing preference shares pursuant to subsection (1), the following matters, among others, must be stated:

(a) Whether or not the right to receive dividends before ordinary shares exists,
(b) The percentage of dividend that the preference shareholder is entitled to receive,
(c) Whether the dividend is cumulative or non-cumulative (distributed only in profit years),
(d) Whether or not preference is to be given in the repayment of share capital upon winding up of the company,
(e) Whether voting rights exist or not, and if voting rights exist, whether they are limited to matters concerning preference shares or extend to other matters as well,
(f) If voting rights extend to other matters pursuant to clause (e), the proportion of voting rights,
(g) Whether or not conversion into ordinary shares is possible,
(h) Whether the preference share capital is redeemable or irredeemable,
(i) Whether the preference shares are redeemed with or without a premium.

(4) If any preference shares are issued as redeemable, such shares shall not be redeemed until the full value thereof has been paid.

(5) Preference share capital shall not be redeemed except from the profits available for distribution as dividends or from the proceeds of a new share issue made for the purpose of redemption.

(6) If any redeemable preference shares issued are to be redeemed at a premium, a separate fund of an appropriate amount shall be provided from the company's profits or the company's share premium account for the purpose of redeeming such share capital.

(7) Except when the amount of redeemable preference shares is redeemed from the proceeds obtained by issuing new shares pursuant to subsection (5), when redeeming preference share capital pursuant to this Act, an amount equal to the face value of the shares redeemed shall be set aside from the profits available for dividend distribution into a capital redemption reserve fund and deposited in that fund.

(8) The capital redemption reserve fund created pursuant to subsection (7) shall be maintained as equivalent to paid-up capital.

(9) After the completion of the redemption process, any preference shares redeemed pursuant to this section shall be deemed to be cancelled automatically.

(10) When a company redeems preference shares, it shall, subject to this section, follow the conditions and procedures specified in the company's articles of association, and upon such redemption of preference share capital, the authorized share capital of the company shall not be deemed to have been reduced for that reason.

(11) If a company redeems or proposes to redeem any preference shares, it may issue new shares of an amount equal to the face value of the shares so redeemed or to be redeemed.

(12) A company shall give notice thereof to the Office within one month of redeeming any preference shares, and upon receipt of such notice, the Office shall record it in the company's register.

(13) Notwithstanding anything contained elsewhere in this section, a company may issue new shares from the capital redemption reserve fund created pursuant to subsection (7) to its shareholders in the form of fully paid-up bonus shares.