Preference shares- Security

[VIRENDER PANDEY]

XYZ Ltd issued  prefrence share of Rs 9,99,00,000/- . Out of amount recieved the company made FD of Rs 9,50,00,000 in the name of the company . Now the company want to give this FD as a security to preference shareholder by entering in to agrement with them. Is this valid as per company law and if valid what are the guidelines & procedure which need to be follow?

[Surender Gupta]

Kindly share you views in this regard.

AI Summary

Security for preference shares: whether pledging a company fixed deposit to preference shareholders is valid and what procedures apply. A company issued preference shares and placed the proceeds in a company fixed deposit; it proposes to grant that fixed deposit as security to the preference shareholders by agreement. The core question is whether pledging or charging a company-held fixed deposit created from preference share subscriptions as security for those shareholders is permissible under company law and what procedural steps, approvals and documentation are required to implement such security.