A violation of preferred stock restrictive covenants usually permits preferred shareholders to ________.
A) force the company into bankruptcy
B) suit against the shareholders
C) force the retirement of the preferred stock at or above its par value
D) force the company to repurchase the shares at a stated amount below par

Question

Quizplus · Accepted Answer

A violation of preferred stock restrictive covenants typically allows preferred shareholders to force the retirement of their preferred stock at or above its par value. This means that the company must purchase the preferred shares back from the shareholders at a price that is equal to or higher than the original price of the shares. The other options listed (forcing the company into bankruptcy, suing shareholders, and forcing the company to repurchase shares below par) are not common remedies for violating preferred stock restrictive covenants.

A Violation of Preferred Stock Restrictive Covenants Usually Permits Preferred