MNO Limited, an unlisted company, engaged in the manufacturing of water pumps propose to issue redeemable preference shares which will be redeemed at the end of 30 years. Discuss the provisions of the Companies Act and t

Section 55 of the Companies Act, 2013 provides that a company limited by shares may, if so authorised by its articles, can issue preference shares which are liable to be redeemed within a period not exceeding twenty years from the date of their issue subject to prescribed conditions. However, Rule 10 of the Companies (Share Capital and Debentures) Rules, 2014 prescribes that a company engaged in the setting up and dealing with of infrastructural projects may issue preference shares for a period exceeding twenty years but not exceeding thirty years, subject to the redemption of a minimum ten percent of such preference shares per year from the twenty first year onwards or earlier, on proportionate basis, at the option of the preference shareholders. In view of the above provisions, MNO Limited which is not engaged in the setting up and dealing with of infrastructural projects, cannot issue redeemable preference shares exceeding twenty years.