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ACCA Applied Skills · Corporate and Business Law (Global) · Capital maintenance and dividend law

Brindle Ltd has issued redeemable preference shares that it must redeem at a future date. Which of the following is correct about redeeming these shares?

Redeemable shares can be redeemed only if they are fully paid up, and the company must still have at least one non-redeemable share in issue afterwards. Payment must be made at the time of redemption, not deferred to a later date.

  1. AThey may be redeemed even if the company has issued no other shares, since redemption is always allowed
  2. BThey may be redeemed only if they are fully paid up and the company retains at least one non-redeemable share in issueCorrect
  3. CThey may be redeemed in return for payment in instalments at a later date, for any fully paid up shares

Explanation

Redemption requires the shares to be fully paid and the company must keep at least one non-redeemable share in issue, otherwise no members would remain. Payment must be made on redemption, not deferred. So the second statement is the one that fits the rules.

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