Describe how companies redeem its preference shares. Identify the different types of preference shares. Now, in this unit we are going to discuss about the redemption of preference shares.Īfter reading this chapter, you are expected to learn about: at present a company cannot issue irredeemable preference shares. According to the Companies Act, 1956, a company can issue only redeemable shares i.e. The redeemable preference shares are issued on the terms that share holders will at a future date be repaid amount which they invested in the company. Redemption is the process of repaying an obligation at predetermined amounts and timings. The issue of preference shares is one of the important sources of capital of a company. A company can issue two types shares equity shares and preference shares. As the total capital of the company is divided into shares, the capital of the company is known as share capital. However, a company can issue shares at a price different from its nominal value or face value. The fixed value of a share register with the registrar of Companies is called face/ nominal value. Total capital of the company is divided into a number of small units of fixed amount and each such unit is called a share. From ownership point of view, there are number of business organizations like, sole proprietorship business, partnership business, cooperative societies, joint stock companies etc. You know that capital of the business depends upon the form of business organization. The fund provided by the owners in to a business is known as capital. 
You have already learnt various aspects of accountancy and corporate accounting in the previous units. 1.3 Conditions for redemption of preference sharesġ.4 Capital Redemption Reserve (CRR) Account
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