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Redemption of Preference Shares. Video Lecture - CA CPT

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FAQs on Redemption of Preference Shares. Video Lecture - CA CPT

1. What are preference shares?
Ans. Preference shares are a type of shares issued by a company that gives the shareholders certain preferential rights over ordinary shareholders, such as a fixed dividend payment or priority in receiving assets during liquidation.
2. How can preference shares be redeemed?
Ans. Preference shares can be redeemed by the company either at a fixed future date or at the discretion of the company. The redemption can be done by paying back the shareholders the face value of the shares along with any accrued dividends.
3. What happens if preference shares are not redeemed?
Ans. If preference shares are not redeemed, the shareholders continue to hold their shares and are entitled to receive the fixed dividend payments or other preferential rights as specified in the share agreement. The company may also be required to pay additional dividends or interest on the unredeemed shares.
4. Can a company redeem preference shares before the specified redemption date?
Ans. Yes, a company can redeem preference shares before the specified redemption date if it has the necessary funds and follows the procedures outlined in the share agreement. The company may need to provide notice to the shareholders and make the redemption payment as specified in the agreement.
5. Are preference shares a good investment option?
Ans. Whether preference shares are a good investment option depends on the individual investor's financial goals and risk tolerance. Preference shares generally offer a more stable income stream through fixed dividends, but they may not provide the same potential for capital appreciation as ordinary shares. It is advisable to carefully evaluate the terms and conditions of the preference shares before making an investment decision.
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