Redemption of Preference Shares

Introduction:
Redemption of preference shares refers to the process of repurchasing or buying back the preference shares by the company from its shareholders. It provides an exit route for the preference shareholders and allows the company to reduce its capital or debt.

Untraceable Preference Shareholder:
An untraceable preference shareholder is a shareholder whose whereabouts or contact information is unknown or cannot be traced by the company. This situation may arise when the shareholder has changed their address or contact details without informing the company.

Redemption of Untraceable Preference Shares:
When a company wants to redeem the preference shares of an untraceable preference shareholder, it faces certain challenges due to the lack of contact information. However, there are certain steps that can be taken to redeem these shares:

1. Publication of Notice:
The first step is to publish a notice in leading newspapers or relevant publications stating the intention of the company to redeem the preference shares of the untraceable shareholder. The notice should include details such as the name of the shareholder, the number of shares to be redeemed, and the redemption date.

2. Communication through Registered Post:
In addition to the publication of notice, the company should also send a registered post to the last known address of the untraceable preference shareholder. The registered post should contain information about the redemption process and provide a deadline for the shareholder to respond.

3. Transfer of Amount to Unclaimed Dividend Account:
If the untraceable preference shareholder fails to respond within the specified time period, the company should transfer the amount due for redemption to the Unclaimed Dividend Account as per the provisions of the Companies Act.

4. Holding the Redemption Amount:
The redemption amount should be held in the Unclaimed Dividend Account for a specified period as prescribed by the Companies Act. During this period, the shareholder can claim the redemption amount by providing valid proof of their ownership of the preference shares.

5. Transfer to Investor Education and Protection Fund (IEPF):
If the untraceable preference shareholder does not claim the redemption amount within the specified period, the company should transfer the amount along with the interest accrued, if any, to the Investor Education and Protection Fund (IEPF) established by the government.

Conclusion:
Redemption of preference shares of untraceable shareholders requires companies to follow a specific process of publication of notice, communication through registered post, and transfer of funds to the Unclaimed Dividend Account or IEPF. These steps ensure that the untraceable preference shareholders have an opportunity to claim their redemption amount and protect their rights as shareholders.