Redeem preferene shares and issue right share in Hong Kong

Answer :

In this case, Sandpiper is a private company. Its directors want to redeem the cumulative redeemable preference share (CRP) and then to issue the right issue to existing shareholders. There are a number of legislations governing these two issues. Only the rules related to private company will be discussed in detail in accordance with Companies Ordinance in Hong Kong and court cases. In this paper, it is organized as follows. Section 1 discusses the ruling of redemption of CRP and section 2 discusses the ruling of issuing of right issue. Section 3 is the comment.



Section 1 Redemption of CRP

Under the Companies Ordinance, there is a concept of maintenance of share capital. After a company issues shares, it is not allowed to reduce its share capital by purchasing its own share (s58 (1A)), providing financial assistance for the purchase of its own shares (s47A-G & 48) and paying dividend except out of distribution profit (s79A-P). The aims are to protect the in...