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PREFERENCE SHARES
PREFERENCE SHARES
reference shares are those which carry
• A preferential right as to the payment of dividend during the lifetime of
the company
• A preferential right as to the return of capital when the company is
wound up
hese shares carry a right of dividend at a fixed rate before any dividend
can be paid on equity shares.
he fixed rate of dividend payable is declared at the time of the issue of
such shares
KINDS OF PREFERENCE
SHARE
i. Cumulative or non- cumulative
ii. Redeemable or irredeemable
iii. Participating or non- participating
iv. Convertible or non- convertible
CUMULATIVE VS. NON-
CUMULATIVE
he holder of cumulative preference shares are entitled to recover the
arrears of preference dividend before any dividend is paid on equity
shares.
n case of non- cumulative preference shares, arrears of dividend do not
accumulate and hence, if dividend is to be paid on equity shareholders in
any year, dividend at the fixed rate for only one year will have to be paid
to preference shareholders before equity dividend is paid.
REDEEMABLE VS.
IRREDEEMABLE
edeemable preference shares are those preference shares whose
amount can be returned by the company to their holder within the
life time of the company subject to the terms of the issue and the
fulfillment of certain legal conditions laid down in Sec. 80 of the
companies act.
he amount of irredeemable preference shares can be returned only
when the company is wound up.
PARTICIPATING VS. NON-
PARTICIPATING
articipating preference shares are entitled not only to fixed rate of
dividend but also to a share in surplus profits which remain after
dividend has been paid at a certain rate to equity shareholders. The
surplus profits are distributed in a certain agreed ratio between the
participating preference shareholder and equity shareholder.
on- participating preference shares are entitled to only the fixed rate
of dividend.
CONVERTIBLE VS. NON-
CONVERTIBLE
he holder of convertible preference shares enjoy the right to get the
preference shares converted into equity shares according to the terms
of issue.
he holder of non- convertible preference share do not enjoy this
right.
THANKS
THE END

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Preference shares

  • 2. PREFERENCE SHARES reference shares are those which carry • A preferential right as to the payment of dividend during the lifetime of the company • A preferential right as to the return of capital when the company is wound up hese shares carry a right of dividend at a fixed rate before any dividend can be paid on equity shares. he fixed rate of dividend payable is declared at the time of the issue of such shares
  • 3. KINDS OF PREFERENCE SHARE i. Cumulative or non- cumulative ii. Redeemable or irredeemable iii. Participating or non- participating iv. Convertible or non- convertible
  • 4. CUMULATIVE VS. NON- CUMULATIVE he holder of cumulative preference shares are entitled to recover the arrears of preference dividend before any dividend is paid on equity shares. n case of non- cumulative preference shares, arrears of dividend do not accumulate and hence, if dividend is to be paid on equity shareholders in any year, dividend at the fixed rate for only one year will have to be paid to preference shareholders before equity dividend is paid.
  • 5. REDEEMABLE VS. IRREDEEMABLE edeemable preference shares are those preference shares whose amount can be returned by the company to their holder within the life time of the company subject to the terms of the issue and the fulfillment of certain legal conditions laid down in Sec. 80 of the companies act. he amount of irredeemable preference shares can be returned only when the company is wound up.
  • 6. PARTICIPATING VS. NON- PARTICIPATING articipating preference shares are entitled not only to fixed rate of dividend but also to a share in surplus profits which remain after dividend has been paid at a certain rate to equity shareholders. The surplus profits are distributed in a certain agreed ratio between the participating preference shareholder and equity shareholder. on- participating preference shares are entitled to only the fixed rate of dividend.
  • 7. CONVERTIBLE VS. NON- CONVERTIBLE he holder of convertible preference shares enjoy the right to get the preference shares converted into equity shares according to the terms of issue. he holder of non- convertible preference share do not enjoy this right.