Week 13 - Redeemable Shares

Question 1

CA 2006 S.684

Answer 1

A limited company has the power to issue shares that are to be redeemed or are liable to be redeemed at the option of the company or the shareholder

Question 2

Who are redeemable shares usually created for?

Answer 2

Employees, perhaps as an incentive or as a reward

Question 3

Redeemable shares may only be issued where…

Answer 3

Redeemable shares may be issued only where other shares are in issue that are not redeemable

Question 4

Do redeemable shares usually give their owners the right to vote?

Answer 4

No - they are not involved in the day-to-day running of things

Question 5

You can only have redeemable shares as long as…

Answer 5

You have ordinary shares as well

Question 6

What does this ensure?

Answer 6

Ensures that a company does not issue only redeemable shares and, once redeemed, only the directors of the company remain with no members

Question 7

A private limited company is only able to redeem shares…

Answer 7

(if it has enough capital to do so - can only buy back with profit of the capital) Out of capital in accordance with Chapter 5 of CA 2006, but specifically from distributable profits of the company or the proceeds of a fresh issue of shares made for the purpose of redemption

Question 8

Having redeemed the shares, how are they treated?

Answer 8

To be treated as cancelled and the amount of the company’s issued share capital is diminished according to the nominal value of the redeemed shares