2013 (Mercantile Law) Bar Exam Questions: Multiple Choice Question 4

[Answer/discuss the question below. Or check Mercantile Law Instructions; Mercantile Law Essay Questions: 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10; Mercantile Multiple Choice Questions: 1, 2, 35, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15; See also 2013 Bar Exam: Information, Discussions, Tips, Questions and Results]


ABC Corp. issued redeemable shares. Under the terms of the issuance, thes hares shall be redeemed at the end of 10 years from date of issuance, at par value plus a premium
of 10%.

Choose the correct statement relating to these redeemable shares. (1%)

(A) ABC Corp. would need unrestricted retained earnings to be able to redeem the shares.

(B) Corporations are not allowed to issue redeemable shares; thus, the issuance by ABC Corp. is ultra vires.

(C) Holders of redeemable shares enjoy a preference over creditors.

(D) ABC Corp. may redeem the shares at the end of 10 years without need for unrestricted retained earnings provided that, after the redemption, there are sufficient assets to cover its debts.

(E) All of the above are incorrect.


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