[amp_mcq option1=”Revenue Profits” option2=”Net proceeds of fresh issue” option3=”Partly out of Revenue profits and partly out of net proceeds of fresh issue” option4=”Out of sale proceeds of fixed assets” correct=”option4″]
The correct answer is: D. Out of sale proceeds of fixed assets
Section 80 of the Companies Act, 1956 states that a company cannot redeem its preference shares out of the sale proceeds of fixed assets. This is because the sale proceeds of fixed assets are considered to be capital profits, and capital profits cannot be used to redeem preference shares.
Revenue profits are profits that are earned from the normal course of business. These profits can be used to redeem preference shares.
Net proceeds of fresh issue are the proceeds that are received from a new issue of shares. These proceeds can also be used to redeem preference shares.
Partly out of revenue profits and partly out of net proceeds of fresh issue is not allowed as per Section 80 of the Companies Act, 1956.
Please let me know if you have any other questions.