SEC-EAD * OPINION
REDEEMABLE SHARES
A Corporation may create and issue redeemable shares of stock, usually classified as preferred shares, provided that such feature is expressly stated in the Articles of Incorporation. When the redeemable shares are issued, the terms and conditions of their redemption must be described not only in the Articles of Incorporation but also on the covering stock certificates. cdtai
The issuance of redeemable shares is limited in duration. The funds collected therefrom are deemed intended for a specific period or project such that when the funds have already served their purpose, the same are returned to the stockholders in accordance with the redemption features of the issued shares.
For the protection of the stockholders, the pertinent SEC rules provide that a corporation that has issued redeemable shares, shall set up and maintain a sinking fund to be deposited with a trustee bank which shall not be invested in risky and speculative ventures. A sinking fund refers to a fund set up by a corporation where cash is gradually set aside in order to accumulate the...
