ACCA Applied Skills · Corporate and Business Law (Global) · Share capital
Verdant Ltd, a private company, has issued redeemable shares under its articles. Which of the following is a general requirement for the lawful redemption of those shares?
Redeemable shares must be fully paid before redemption. This ensures the company has received the whole issue price and that the payment is made from permitted sources. Court approval is not always needed, and debenture proceeds are not a permitted funding source for redemption.
- AThe shares must be fully paid before they are redeemedCorrect
- BThe shares must be redeemed only out of the proceeds of a new issue of debentures
- CThe redemption must be approved by the court in every case
Explanation
Under the standard company law rules, redeemable shares can only be redeemed if they are fully paid, because the company must receive the full price on redemption. Court approval is not required in every case, and funding is from distributable profits or a fresh share issue, not debentures.
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