Q:

What are redeemable shares?

A:

Certain shares, usually preferred shares, are redeemable by its terms at a fixed date or at the option of either the corporation who issued the shares, the stockholder or both at a given price. Investopedia explains that an issuing-corporation may require employees to redeem shares based on predetermined timelines.

Accounting Tools explains that redeemable shares may be bought back or taken up by the corporation upon the expiration of a fixed period regardless of any unrestricted, retained earnings in the financial records of the corporation. Redeemable shares may be deprived of voting rights, provided that it is stated in the articles of incorporation. According to Accounting Tools, these type of shares are also referred to as mandatorily redeemable preferred stock or callable preferred stock.


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