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Preference shares can be redeemed : 
  • a)
    Only if they are fully paid 
  • b)
    Even if they are partly paid up 
  • c)
    After getting the permission form the court only 
  • d)
    All of the above 
Correct answer is option 'A'. Can you explain this answer?
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Preference shares can be redeemed :a)Only if they are fully paidb)Even...
Redemption of Preference Shares

Redemption of preference shares means the repurchase or redemption of preference shares by the company. The redemption of preference shares can be done only if they are fully paid up.

Reasons for Redemption of Preference Shares

There may be various reasons for the redemption of preference shares which are as follows:

- To reduce the capital of the company
- To decrease the financial burden of the company
- To improve the financial position of the company
- To remove the obligation of the company to pay fixed dividends to preference shareholders
- To increase the earnings per share of the company

Procedure for Redemption of Preference Shares

The company has to follow the following procedure for the redemption of preference shares:

- Obtain the approval of shareholders through a special resolution
- Redeem the shares only if they are fully paid up
- Transfer the amount of redemption to a separate account called the "Capital Redemption Reserve Account"
- File the necessary documents with the Registrar of Companies

Conclusion

In conclusion, preference shares can be redeemed only if they are fully paid up. The company has to follow the above-mentioned procedure for the redemption of preference shares. The redemption of preference shares helps the company to improve its financial position and earnings per share.
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Preference shares can be redeemed :a)Only if they are fully paidb)Even if they are partly paid upc)After getting the permission form the court onlyd)All of the aboveCorrect answer is option 'A'. Can you explain this answer?
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