NCLT ALLOWED A COMPANY TO EXTEND ITS 5% TENURE REDEEMABLE CUMULATIVE PREFERENCE SHARED BY TWO YEARS

The Bangalore National Company Law Tribunal (NCLT) allowed a company to extend its 5% tenure Redeemable Cumulative Preference Shares by two years given the company's inability to mobilise funds via further issues of shares due to the unexpected spread of Covid 19 since March 2020, resulting in affecting the normal operation of the company. 

M/s. Indiana Hospital and Heart Institute Limited engaged in the business to own, establish, maintain and manage hospitals, including nursing homes, research centres, etc. Due to Covid 19, the company could not raise the required funds of 5% Redeemable Cumulative Preference Shares. Therefore the management of the company was forced to extend the tenure in the hope that the step could help in the management of the company.

The Company filed the petition u/s 55 (3) of the Companies Act 2013, which states that, where a company is not in a position to redeem any preference shares or to pay a dividend, if any, on such shares in accordance with the terms of issue, it may, with the consent of the holders of three-fourths in value of such preference shares and with the approval of the Tribunal on a petition, issue further redeemable preference shares equal to the amount due, including the dividend thereon. 

The petitioner's counsel, Nebil Nizar, submitted the consent of three-fourths of shareholders, and in view of that, NCLT allowed the Company's prayer. 

Author: Papiha Ghoshal