A call provision sets forth provisions for a corporation to redeem its preferred stock at a fixed price on or after a specified date.

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A call provision is a feature commonly found in preferred stock (and sometimes in bonds) that allows the issuing corporation to repurchase or "call" its securities from investors at a predetermined price after a specified date. This provision is beneficial to the issuer because it provides flexibility to retire the preferred stock when it becomes advantageous to do so, such as in a declining interest rate environment or when the company wishes to reduce its dividend payments.
The call provision will detail the terms under which the company can exercise this option, including:
1. **Call Price**: This is the price at which the company can repurchase the stock. It is usually set at a premium to the stock's par value to compensate investors for the early redemption.
2. **Call Date**: The date on or after which the company has the right to call the stock. There is often a call protection period, during which the stock cannot be called, providing investors with a certain period of guaranteed return.
3. **Notice Period**: The provision will specify how much advance notice the company must give to the preferred stockholders before it can call the stock. This allows investors time to adjust their investment strategy.
4. **Any Additional Terms**: This might include the number of shares the company can call at any one time or any other special conditions.
The inclusion of a call provision is generally viewed as less favorable for investors, as it limits the potential upside of holding the preferred stock. If interest rates fall, the company might choose to call the stock to issue new preferred shares at a lower dividend rate, forcing investors to reinvest at lower yields. However, the call provision is often a trade-off for a higher dividend rate or other favorable terms offered by the issuer at the time of issuance.
Investors in preferred stocks with call provisions should be aware of these terms and consider the potential impact on their investment, especially if they are seeking long-term, stable income.

A Call Provision Sets Forth Provisions for a Corporation to Redeem