What are the conditions to be fulfilled for redemption of preference shares?

[chirag-garg]

The conditions are mentioned in the T&C of the agreement between the issuer and investors. Some standard conditions are:

1. Usually, a fixed rate of dividends need to be paid over the years.

2. The company has to pay dividends from its earnings after tax.

3. Other than earnings after tax, it can be repaid from share premium A/c.

4. The company cannot repay from the current assets.

5. The company cannot sell its fixed assets and repay them.

6. The company cannot borrow & repay preference shareholders.