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?

AI Summary

XYZ Ltd's Use of Fixed Deposit as Security for Preference Shareholders: Legal Clarity Needed Under Company Law XYZ Ltd issued preference shares worth Rs 9,99,00,000 and used Rs 9,50,00,000 of the proceeds to create a fixed deposit in the company's name. The company intends to use this fixed deposit as security for the preference shareholders through an agreement. The query seeks clarification on the validity of this action under company law and the necessary guidelines and procedures. A response from a chartered accountant requested further views on the matter, indicating a need for more detailed legal guidance.