Redeemable and irredeemable preference shares differ mainly in terms of repayment of capital and duration of investment. Redeemable preference shares are issued with a fixed or specified period after which the company must repay the capital to shareholders. Redemption can be done out of profits, fresh issue of shares, or capital, subject to legal provisions. These shares provide investors with greater certainty, as they know when their capital will be returned. Because of this defined maturity, redeemable preference shares are often used for medium-term financing and are considered less risky for investors.

On the other hand, irredeemable preference shares do not carry a fixed redemption date. The capital invested is not repaid during the lifetime of the company and is returned only in the event of liquidation. As a result, irredeemable preference shares represent a permanent source of capital for the company. Investors rely mainly on regular dividend income rather than capital repayment, making them more suitable for long-term income seekers.

Another key difference lies in financial flexibility. Redeemable preference shares create a future cash obligation for the company, which can affect liquidity planning. Irredeemable preference shares do not impose such obligations, giving the company more stability in its capital structure. However, from an investor’s perspective, irredeemable shares carry a higher risk due to the uncertainty of capital recovery. Overall, redeemable preference shares offer certainty and lower risk, while irredeemable preference shares provide permanence and long-term funding for companies.