CORPORATE LAW Essay Example | Topics and Well Written Essays - 1500 words

CORPORATE LAW - Essay Example The total value (including premium) of the new issue will be  £ 6500. The relevant legal position in this regard is as under: The directors of a limited company are able to settle terms of redemptions of shares only when they are empowered by the Articles of association of the company to do so. Otherwise the terms prescribed in the articles are to be followed. Accordingly the process of redemption to be followed by Mirza Plc will depend upon the terms either provided in its Articles of association or settled by the resolution of the board only when articles expressly empower directors to do so. The terms of redemption of shares must be laid down before the issuance of such redeemable shares. In other words Mirza Plc can redeem shares only at a premium when such term existed before issuance of its redeemable shares. Under no circumstances Mirza Plc can settle fresh terms of redemption of shares after issuance of such shares. That is why the law provides that the terms, conditions, and manners of redemption must be stated in the statement of capital required to be filed with registrar. As per provision of the Companies Act, 2006, Mirza Plc may redeem the shares out of undistributed profit. However,it may finance the redemption out of a fresh issue. It appears that Mirza Plc has decided to use both the options. As the required redemption amount is  £ 15000 (including premium) and new issue will fetch only  £ 6500 (including premium), it is clear that Mirza Plc will also be using accumulated profits to pay part of redemption liability. One of the conditions prescribed by the Companies Act, 2006 is that premium on redemption can be paid only when shares were originally issued at premium. Mirza Plc fulfils this condition as redeemable shares were issued at a premium of  £ 2500. The law requires that redemption must be made out of undistributed profits, but proceeds of fresh issue made for redemption can be