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    Question

    A company decides to raise money by issue of preference

    shares. As per the Companies Act, it can issue preference shares with a maximum tenure of ________, or ________ if it is an infrastructure company.
    A 10 years; 20 years Correct Answer Incorrect Answer
    B 15 years; 25 years Correct Answer Incorrect Answer
    C 20 years; 25 years Correct Answer Incorrect Answer
    D 20 years; 30 years Correct Answer Incorrect Answer
    E 25 years; 30 years Correct Answer Incorrect Answer

    Solution

    As per Section 55 of the Companies Act, 2013: • Prohibits issue of irredeemable preference shares   • Preference shares must be redeemed within 20 years from the date of issue. • Exception: Companies engaged in infrastructure projects may issue preference shares redeemable up to 30 years, subject to prescribed conditions. Section 55 ensures that preference shares function as a hybrid instrument, not perpetual debt

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