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CA Foundation · Accounting · Company Accounts

Under the Companies Act, 2013, which of the following preference shares can a company NOT issue?

A manufacturing company cannot issue preference shares redeemable after 25 years, because the Act limits the redemption period to 20 years from issue, with exceptions only for specified infrastructure projects. Redemption at a premium or after 10 years is allowed.

  1. APreference shares redeemable after 10 years from the date of issue
  2. BPreference shares redeemable at a premium
  3. CPreference shares redeemable within 20 years for infrastructure projects
  4. DPreference shares redeemable at the option of the company after 25 years for a manufacturing companyCorrect

Explanation

Preference shares must be redeemed within 20 years of issue (longer only for specified infrastructure projects, subject to conditions). A manufacturing company therefore cannot issue shares redeemable after 25 years. Redemption at a premium and a 10-year term are permitted.

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