Cumulative Convertible Redeemable Preference Share

Hi All

I am hoping some of you may be able to offer your views on this point! 

I have 100,000 preference shares of £1 each which have been issued on 1 January 2011, these are fully paid. 

The preferences shares are redeemable, in full, on or any time after 1 January 2013 at £1 each, together with any arrears of accruals of dividend by either the holder or by the company, as long as all arrears of dividends are paid out of available profits or through a loan.

At the option of the holder, if the preference shares are not redeemed in full by 1 January 2013 any holder of preference shares may at any time, require conversion of all the Preference shares held at any time into Ordinary Shares.  Those shares will convert automatically. The relevant preference shares will convert at a rate of 0.5 Ordinary Shares  for 1 Preference Share held and into Deferred Shares of 1 for 1.

The preference shares carry no voting rights at a general meeting of the Company.  On a winding-up of the Company, holders are entitled to receive the sum of £1 per preference share, together with any arrears or accruals of dividend, in priority to any payment on any other class of shares.

Holders are entitled to a preferential dividend at a fixed cumulative annual rate of 5% of the £1 par value per Preference Share, payable yearly on 1 January.  If there are insufficient profits, this will be tested on a quarterly basis.

The preference shares carry no voting rights at a general meeting of the Company.  On a winding-up of the Company, holders are entitled to receive the sum of £1 per preference share, together with any arrears or accruals of dividend, in priority to any payment on any other class of shares. 

I have treated these shares as a current debt iaw FRS 25 and accrued dividend accordingly but having read some further manuals am now wondering whether this is actually part debt / part equity!?