What are redeemable preference shares?

Redeemable Preference Shares

According to Section 100 of the Companies Act, 1956 : If a company collects the money through redeemable preference shares, this money must be returned on its maturity whether company is liquidated or not.

Section 80 of the Companies Act, 1956 lays down some provisions relating to redeemable preference shares :

1. The shares to be redeemed must be fully paid-up.

2. Capital reserves from forfeiture of shares and share premium account are not available for payment of redeemable preference share holders.

3. Its payment will be out of the net profit of the company or amount received on issue of new shares. Company cannot sale amount of asset for redemption of redeemable preference shares.

HOW IT WORKS

Pradeep Shankar