Question

Which company can issue redeemable preference shares?

• A. A company limited by shares.
• B. A company limited by guarantee not having share capital.
• C. A company limited guarantee having share capital.
• D. An unlimited company.

Answer 1

The correct option is A A company limited by shares.

Redeemable preference shares are the ones which can be redeemed to the shareholders after a period of time which is almost 20 years.

A company limited by shares is the one in which the members have only limited liability to pay company's dues.

A company can redeem its preference shares if the liability of its shareholders is limited to an extent. This means that the company whose liability is limited to an extent can afford to bear all the expenses on the redemption of preference shares. Because redemption of shares is a costly procedure as the company has to provide various incentives while redeeming the shares like a discount on redemption and many more. Thus, a company who has to pay only limited dues can only have the redemption procedure.

Hence, a company which is limited by shares can only redeem its preference shares.