CS Executive · Corporate Accounting and Financial Management · Related Aspects of Company Accounts
Under the Companies Act, 2013, which of the following preference shares of a company limited by shares can be redeemed?
Only fully paid preference shares can be redeemed. The Companies Act, 2013 prohibits redemption of partly paid preference shares, so any unpaid call must first be collected before the company redeems them, whatever the dividend position.
- AShares that are partly paid-up, once a call is made
- BShares that are fully paid-upCorrect
- CShares on which only 75% of the nominal value is paid
- DShares on which dividend is in arrears, even if not fully paid
Explanation
The Act provides that no preference shares shall be redeemed unless they are fully paid. Partly paid shares, whatever the reason or arrears of dividend, cannot be redeemed until the balance is called and paid.
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