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A private company's Articles permit issue of preference shares with preference only for dividend payment, NOT for capital repayment on winding up. Such an issue is:
AInvalid — both preferences are mandatory
BValid only if the company is private and the Articles allow
CValid — Section 43 permits either of the two preferences
DInvalid — single preference makes them equity shares
Answer & Solution
Correct answer: B. Valid only if the company is private and the Articles allow
1. Section 43 read with Rule 9 of the Companies (Share Capital and Debentures) Rules permits private companies to issue preference shares as their Articles allow.
2. Public companies generally require both preferences; private companies have flexibility.
3. Hence (D).
_Source: ICAI BoS CA Inter Paper 2 — Share Capital and Debentures_