Multiple choice

Redemption of preference shares

  1. constitutes reduction of authorised share capital

  2. constitutes reduction of Issued share capital

  3. constitutes reduction of subscribed share capital

  4. does not constitute reduction of authorised share capital
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Authorized Share Capital is the maximum amount of Share capital that a company can issue during its lifetime. Redemption of prefernce share doesnot cause any reduction in this maximum limit, i.e. Authorised Share Capital. Redemption of preference shares causes causes a redution in Subscribed and Issued Share Capital of a company.

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