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CA Foundation · Business Laws · The Companies Act, 2013

Rohan Engineering Ltd, an unlisted public company, issued preference shares. Which of the following statements about the redemption period of preference shares is correct under the Companies Act, 2013?

Preference shares must be redeemed within 20 years of issue, and irredeemable preference shares cannot be issued. Infrastructure companies may issue preference shares with a longer redemption period, subject to prescribed conditions, such as redeeming in instalments from the 21st year.

  1. APreference shares may be redeemed after 30 years from issue
  2. BA company can issue irredeemable preference shares
  3. CPreference shares must be redeemed within 20 years, except for infrastructure projectsCorrect
  4. DPreference shares must always be redeemed within 5 years

Explanation

A company cannot issue irredeemable preference shares or preference shares redeemable beyond 20 years from the date of issue. Companies engaged in infrastructure projects may issue them for longer periods, subject to the prescribed conditions. Irredeemable preference shares are prohibited, so that option is wrong.

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