Company law usually requires that where a company redeems preference shares it must do so out of profits that would otherwise be available for dividends or out of the proceeds of a fresh issue of shares made for the purpose of the redemption.

Question

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This is a correct statement. Company law generally requires that a company can redeem its preference shares only if it has sufficient profits that would otherwise be available for dividends or if it issues new shares for that particular purpose. This is to ensure that the company is not able to reduce its capital if it does not have sufficient profits or reserves to support the redemption.

Company Law Usually Requires That Where a Company Redeems Preference