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What is redeemable preference shares ?

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What is redeemable preference shares ?
  • 1 answers

Preeti Dabral 7 years, 11 months ago

  • The fund provided by the owners in to a business is known as capital. You know that capital of the business depends upon the form of business organization.
  • From ownership point of view, there are number of business organizations like, sole proprietorship business, partnership business, cooperative societies, joint stock companies etc.
  • Total capital of the company is divided into a number of small units of fixed amount and each such unit is called a share.
  • The fixed value of a share register with the registrar of Companies is called face/ nominal value. However, a company can issue shares at a price different from its nominal value or face value.
  • As the total capital of the company is divided into shares, the capital of the company is known as share capital.
  • A company can issue two types shares equity shares and preference shares. The issue of preference shares is one of the important sources of capital of a company.
  • Redemption is the process of repaying an obligation at predetermined amounts and timings.
  • The redeemable preference shares are issued on the terms that share holders will at a future date be repaid amount which they invested in the company.
  • According to the Companies Act, 1956, a company can issue only redeemable shares i.e. at present a company cannot issue irredeemable preference shares.
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