Question

Preference shares cannot be redeemed unless they are.

• A. Partly paid up
• B. Fully paid up
• C. Transferred
• D. Re-issue

Answer 1

The correct option is B Fully paid up

Redemption of preference shares is done only when the shares are fully\quad paid up .

Fully called up shares are the ones on which the whole amount has been received by the company from its shareholder.

This is because the company needs funds for the redemption procedure and these funds are raised with the help of money received for the called up value. Moreover, the company would not consider the shareholders who have not paid their dues and once their dues are fully settled, then only company will pay back or redeem the amount to preference shareholders.

So, the company would redeem the preference shares only when it has received the full called up value.