Mandatorily Redeemable Shares

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DEFINITION of 'Mandatorily Redeemable Shares'

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.

INVESTOPEDIA EXPLAINS '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.

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