Question

Which of the following may be utilized by a limited company for the redemption of redeemable preference shares?

• A. General Reserve
• B. Dividend Equalisation Fund
• C. Profit and Loss account balance
• D. Workmen Compensation Fund
• E. All of these

Answer 1

The correct option is E All of these

The redempton of preference shares is subject to the following restrictions :

1. Fully paid - Such shares can be redeem only if these are fully paid.
2. Two sources of redeeming such shares - Such shares can be redeem only out of the following two surces:

(a) Divisible profits, i.e., profits available for distribution as dividend. Some examples of divisible profit are as under -

• General reseerve
• Reserve fund
• Dividend equalisation fund
• Insurance fund
• Workmen compensation fund
• Workmen accident fund
• Profit and loss account

(b) Proceeds of fresh issue of shares made for the pourpose of redeption.