(1)Subject to the provisions of this section, a company limited by shares may, if so authorised by its articles, issue preference shares which are, or at the option of the company are to be liable, to be redeemed:Provided that-(a)no such shares shall be redeemed except out of profits of the company 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;(b)no such shares shall be redeemed unless they are fully paid;(c)the premium, if any, payable on redemption shall have been provided for out of the profits of the company or out of the company's [security premium account,] before the shares are redeemed;(d)where any such shares are redeemed otherwise than out of the proceeds of a fresh issue, there shall, out of profits which would otherwise have been available for dividend, be transferred to a reserve fund, to be called the capital redemption reserve account, a sum equal to the nominal amount of the shares redeemed; and the provisions of this Act relating to the reduction of the share capital of a company shall, except as provided in this section, apply as if the [capital redemption reserve account] [ Substituted by Act 65 of 1960, Section 23, for " the capital redemption reserve fund" (w.e.f. 28.12.1960).] were paid-up share capital of the company.
