Mandatorily Redeemable Shares

  

Categories: Stocks

You work for a company and get stock as part of your compensation package. However, these shares have a clause that makes them mandatorily redeemable in some circumstances.

So the company can make you sell the shares back to the firm if some pre-set situations come up. One of these triggering events happens if you leave the firm. They don't want a potentially disgruntled ex-employee walking around with a big chunk of company stock. So they only give employees mandatorily redeemable shares.

You get in a fight with the CEO. Insults are shouted. Chairs are thrown. Kale/protein shakes are poured on heads. Bottom line: you're out.

And, as part of your departure, the company calls in your mandatorily redeemable shares. You have no choice...the company forces you to sell the shares back to them at the prices stipulated in the clause.

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