What are 'Mandatorily Redeemable Shares'

Mandatorily redeemable shares are shares owned by an individual or entity which are required to be redeemed for cash or another such property at a stated time or following a specific event. Mandatorily reedemable shares are often issued by employers as a sort of compensation kicker to employees; however, the employer would require the employees to redeem these shares for cash or bonds, for example in the case of certain prescribed events or timelines.

BREAKING DOWN 'Mandatorily Redeemable Shares'

One example of a situation where an employer would issue manditorily redeemable shares would be in the case of an employee quitting the firm. The employer would excercise its "call" option on these shares forcing the exiting employee to sell back his or her company shares. An employer might do this in a situation where the shares are restricted and greatly in the money, or if it is a closely-held company with relatively few shares in float.

RELATED TERMS
  1. Mandatory Redemption Schedule

    Specified dates when a bond issuer is required to redeem all ...
  2. Open-End Management Company

    A company that distributes and redeems securities it issues. ...
  3. Call Date

    The date on which a bond can be redeemed before maturity. If ...
  4. Special Employer

    An employer who receives an employee on loan from another business, ...
  5. General Employer

    An employer who loans an employee to another business, and who ...
  6. Stock Compensation

    A way corporations use stock options to reward employees. Stock ...
Related Articles
  1. Investing

    An Inside Look At ETF Construction

    If you're an investor who likes to understand how and why your investment products work, this article is for you!
  2. Financial Advisor

    Life Insurance Plans to Help Your Small Business Retain Employees

    How to use and design cash value life insurance plans as an incentive to help attract and retain key employees.
  3. Investing

    The Basics Of Outstanding Shares And The Float

    We go over different types of shares and what investors need to know about them.
  4. Investing

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
  5. Financial Advisor

    Beware Of Company Stock In Qualified Plans

    While this strategy does have a few advantages, it can also pose some substantial risks to employees.
  6. Managing Wealth

    Get The Most Out Of Employee Stock Options

    Many corporations encourage employees to participate in the company’s growth by offering them a piece of the pie. That means employee stock options.
  7. Investing

    What is a Stock Option?

    An employee stock option is a right given to an employee to buy a certain number of company stock shares at a certain time and price in the future.
  8. Small Business

    Hiring? Regulations Small Businesses Need to Know

    When a small business becomes an employer, it has new responsibilities. Make sure you familiarize yourself with regulatory requirements.
  9. Personal Finance

    Introduction To Phantom Stock And SARs

    Phantom stock and stock appreciation rights reward employees with compensation tied to stock performance.
  10. Insurance

    Split Dollar Life Insurance: How it Works

    Understanding how split dollar life insurance plans are designed and what tax regulations they must follow.
RELATED FAQS
  1. Why would a company choose to repurchase in lieu of redeem?

    Learn the difference between a stock repurchase and a stock redemption, and find out about the reasons why a company might ... Read Answer >>
  2. What are the different kinds of shares that a Public Limited Company (PLC) can issue?

    Learn what a public limited company is, and understand all of the various types of stock shares offered by public limited ... Read Answer >>
  3. Why should a company buy back shares it feels are undervalued instead of redeeming ...

    Discover the difference between common stock and preferred stock. When is repurchase preferable to redemption, and what factors ... Read Answer >>
  4. I've noticed executives buy a lot of stock below market value, and then they sell ...

    On October 30, 2006, a Google executive officer purchased 2,541 shares of Google at $9 per share and sold these same shares ... Read Answer >>
  5. What are restricted shares?

    Understand what a restricted share is. Learn why a company would issue restricted shares to employees and why an employee ... Read Answer >>
  6. How do restricted stocks, treasury stocks and stock appreciation rights benefit employees?

    Restricted stock represents any equity that is conditionally given or sold to an insider as compensation or as part of an ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center