Part IIShare Capital and Debentures

Miscellaneous Provisions as to Share Capital

65Power of company to pay interest out of capital in certain cases

(1)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 lengthened period, the company may 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 in this section mentioned, and may 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 plant:

Provided that—

(a)no such payment shall be made unless it is authorised by the articles or by special resolution;

(b)no such payment, whether authorised by the articles or by special resolution, shall be made without the previous sanction of the Board of Trade;

(c)before sanctioning any such payment the Board of Trade may, at the expense of the company, appoint a person to inquire and report to them as to the circumstances of the case, and may, before making the appointment, require the company to give security for the payment of the costs of the inquiry;

(d)the payment shall be made only for such period as may be determined by the Board of Trade, and that period shall in no case extend beyond the close of the half year next after the half year during which the works or buildings have been actually completed or the plant provided;

(e)the rate of interest shall in no case exceed four per cent, per annum or such other rate as may for the time being be prescribed by order of the Treasury;

(f)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;

(g)nothing in this section shall affect any company to which the Indian Railways Act, 1894, as amended by any subsequent enactment, applies.

(2)The power conferred by this section on the Treasury shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.