CAPITAL AND SHARES 
39 
Under the Act of 1929 (see s. 46) a company may, if so 
authorised by its articles, issue preference shares which are, 
or at the option of the company are, liable to be redeemed. 
This power is, however, subject to the following limitations: 
(1) only fully paid shares may be redeemed, (2) redemption 
may only be effected out of profits which would otherwise 
be available for dividend or out of the proceeds of a fresh 
issue of shares made for the purposes of the redemption, 
(3) if the redemption is effected out of profits, there shall be 
transferred out of profits which would otherwise have been 
available for dividend to a special ‘Capital Redemption 
Reserve Fund’ a sum equal to the amount applied in redeeming 
the shares and (4) if the shares are redeemed at a premium, 
the premium must in any event be provided for out of the 
profits of the company before the shares are redeemed. 
Having regard to ss. (3) it would appear to be essential that 
the actual terms of redemption must be specified in the articles 
and that an article giving the directors power to fix the 
terms would be invalid. 
Where under this section a company has redeemed or is 
about to redeem any preference shares, it may issue shares 
up to the nominal amount of the shares redeemed or to be 
redeemed as if such latter shares had never been issued 
and no capital duty will be payable under the Stamp Act 
upon such new issue provided that where the new issue is 
made before the redemption of the old shares, the old shares 
are redeemed within one month after the issue of the new 
shares [S. 46 (4).] 
The provisions of the Act as to reduction of capital apply 
to the Capital Redemption Reserve Fund save that after new 
shares have been issued in place of redeemed shares under 
the above mentioned provision enabling such issue, the 
Capital Redemption Reserve Fund may then be applied up 
to an amount equal to the nominal amount of the new shares 
so issued, in paying up unissued shares of the company to be 
issued to the members of the company as fully paid bonus 
shares. 
Shares can only be issued at a discount under the provisions Restrictions 
of s. 47, but whether shares are, or are not, offered for public as to Issue. 
subscription, a commission may be paid subject to the con- 
ditions mentioned in s. 43 of the Act (see Chapter IX, p. 95). 
If shares are illegally issued at a discount, the allottee cannot 
get rescission when once his name has been registered if he 
knew that the shares were being issued at a discount and 
assented to his name being placed on the register for such