Companies Act & MCA

Preference Shares Issue and Redemption Under Section 55

Finin2min Compliance Desk·June 2026·7 min readSECTION 55

Preference shares can be useful financing instruments, but Section 55 makes one point clear: irredeemable preference shares are not permitted after commencement of the Act.

For broader context, see the Companies Act, MCA and Startup Compliance Hub.

Section 55 base

Section 55 states that no company limited by shares shall issue any preference shares which are irredeemable. A company may issue preference shares liable to be redeemed within the statutory period and conditions.

Use the Companies Act Related-Party Transaction Approval Checker to work through the related inputs before acting.

Issue file

Item	Control
Articles authorisation	Check whether preference share issue is permitted.
Terms of issue	Dividend, redemption period, conversion and rights.
Valuation/pricing support	Important for investor and accounting review.
Allotment filing	PAS-3, register and certificate update.
Redemption planning	Track source of redemption and due date.

For the connected rule, example or next step, see Rights Issue and Further Issue of Shares Under Section 62.

Redemption controls

Maintain preference-share register and terms sheet.
Calendar redemption date well in advance.
Check distributable profits/fresh issue route where relevant.
Record board/shareholder approvals.
Update registers after redemption.

For the connected rule, example or next step, see Beneficial Interest in Shares Under Section 89: Declaration Checklist.

Finin2min warning

Preference share is not permanent quasi-equity by default. Redemption terms and funding should be planned from day one.

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For the connected rule, example or next step, see Share Certificate Issue and Duplicate Certificate: Evidence Checklist.

Official sources used

This article is intentionally source-limited to official India Code / MCA material. Verify final filing positions with the latest Act, Rules, MCA forms and portal advisories before publishing.

FAQs

Can a company issue irredeemable preference shares? ▾

Section 55 states that no company limited by shares shall issue irredeemable preference shares.

Should redemption date be tracked? ▾

Yes. Preference shares are redeemable instruments and redemption planning is critical.

Do registers need update? ▾

Yes. Preference shareholders and redemption records should be reflected in statutory registers.

Source and review trail

Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.

Primary category: Companies Act & MCA
Official starting point: www.mca.gov.in