GLOSSARY

REDEEMABLE PREFERENCE SHARE

12 May 2016 By PDSNET

This refers to preference shares or debentures, which are issued with the specific undertaking that they will be bought back or paid out by the company at a certain future date. So redeemable preference shares are really a form of long-term indebtedness, which clearly has to be paid back on pre-determined dates. The only real difference between redeemable "prefs" and debentures is that the debentures are units of loan capital and must receive their interest even if the company is unprofitable, whereas the prefs are share capital and receive dividends - which may not be declared by the board of directors, if the company is not making a profit. Most companies treat their redeemable prefs as current liabilities once their date of redemption is closer than one year.

Share this glossary term: