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Does a Company have power to pay interest out of Capital?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 kruthika asked over 2 years ago

Hi Friends, I am Kruthika. I want to know, Does a Company have power to pay interest out of Capital?

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered about 2 years ago

(a) pay interest on so much of that share capital as is for the time being paid-up, for the period and subject to the conditions and restrictions , and (b) charge the sum so paid by way of interest, to capital as part of the cost of construction of the work or building, or the provision of the plant.

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Open uri20170510 32134 1uwcnoc?1494421631 Shubhangi Jain answered over 2 years ago

Where any shares in a company are issued for the purpose of raising money to defray the expenses of the construction of any work or building, or the provision of any plant, which cannot be made profitable for a lengthy period, the company may (a) pay interest on so much of that share capital as is for the time being paid-up, for the period and subject to the conditions and restrictions , and (b) charge the sum so paid by way of interest, to capital as part of the cost of construction of the work or building, or the provision of the plant. No such payment shall be made unless it is authorised by the articles or by a special resolution and without the previous sanction of the Central Government.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 phool chandra singh answered over 2 years ago

Dear, your query is that Does a Company have power to pay interest out of Capital? answer of your query is that Power of company to pay interest out of capital in certain cases. Where any shares of a company are issued for the purpose of raising money to defray the expenses of the construction of any works or buildings or the provision of any plant which cannot be made profitable for a long period, the company may pay interest on so much of such share capital as is for the time being paid up and charge the interest so paid to capital as part of the cost of the construction or provision but— (a) no such payment shall be made unless it is authorized, by the articles or by special resolution, and is approved by the Court; (b) before approving of any such payment, the Court may at the expense of the company appoint a person to inquire and report as to the circumstances of the case, and may require the company to give security for the payment of the costs of the inquiry; (c) the payment shall be made only for such period as is determined by the Court, but in no case extending beyond a period of twelve months after the works or buildings have been actually completed or the plant provided; (d) the rate of interest shall in no case exceed five per centum per annum or such other rate as is for the time being prescribed; and (e) the payment of the interest shall not operate as a reduction of the amount paid up on the shares in respect of which it is paid. Thanks & Regards,

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