Commonwealth Numbered Acts

COMPANIES ACT 1981 No. 89 of 1981 - SECT 120

120. (1) Subject to this section, a company having a share capital may, if so
authorized by its articles, issue preference shares that are, or at the option
of the company are to be, liable to be redeemed.

(2) The redemption shall not be taken to reduce the authorized share capital
of the company.

(3) The shares shall not be redeemed-

   (a)  except on such terms and in such manner as are provided by the
        articles;

   (b)  except out of profits that would otherwise be available for dividends
        or out of the proceeds of a fresh issue of shares made for the
        purposes of the redemption; and

   (c)  unless they are fully paid-up.

(4) The premium (if any) payable on redemption shall be provided for out of
profits or out of the share premium account.

(5) Where redeemable preference shares are redeemed otherwise than out of the
proceeds of a fresh issue of shares, there shall, out of profits that would
otherwise have been available for dividends, be transferred to a reserve
called the ''capital redemption reserve'' a sum equal to the nominal amount of
the shares redeemed, and the provisions of this Act relating to the reduction
of the share capital of a company, other than sub-section 123 (6), apply,
except as provided by this section, as if the capital redemption reserve were
paid-up share capital of the company.

(6) Where, pursuant to this section, a company has redeemed or is about to
redeem any preference shares, it may issue shares up to the sum of the nominal
values of the shares redeemed or to be redeemed as if those preference shares
had never been issued.

(7) The capital redemption reserve may be applied in paying up unissued shares
of the company to be issued to members of the company as fully-paid bonus
shares.

(8) Where a company redeems any redeemable preference shares, it shall, within
14 days after so doing, lodge with the Commission a notice specifying the
shares redeemed.

(9) Shares shall be taken to have been redeemed notwithstanding that a cheque
given in payment of the amount payable upon redemption of the shares has not
been presented for payment.

(10) If a company fails to comply with this section, the company and any
officer of the company who is in default are each guilty of an offence.