With a group of dedicated, research oriented and skilled professionals, we help entrepreneurs and startups to start their business and manage their statutory and legal compliance, at affordable cost

Contact

04717961623, +917907589078

T.C 4/1012 (7), 2nd Floor, SCNRA, B Street,Kowdiar, Kerala 695003

Preference shares – A brief Note

Sensex Fall 660 090320055008 170320072909 190320034758 130420051958 060520062755

Preference shares are often referred to as preferred stock. It means they are preferred over other types of shares for payment of Dividend and return of Capital. If the company enlists for bankruptcy, preferred shareholders are entitled to be paid before common shareholders from company assets.

Most of the preferred shares have a fixed dividend, which is a guaranteed return, whereas common equity shares do not have such facility. Typically, preferred shareholders also have no voting rights, but usually, common shareholders do. Preference shares come under four sections: convertible Preference shares, cumulative Preference shares, non-cumulative Preference shares, and participating Preference shares.

Section 55(2) of Companies Act 2013 states that a company limited by shares may, if so authorised by its articles, issue preference shares which are liable to be redeemed within a period not exceeding twenty years from the date of their issue subject to such conditions as may be prescribed.

Following are the main difference between Equity Shares and Preference Shares

Equity Shares Preference Shares
Equity Shares means the share in the Ownership of a CompanyPreference Shares are more similar to debt instruments
The whole or part of the net profit can be shared among equity shareholders, in respect o their shareholding percentageDividend is fixed and no participation in surplus profits
Equity shareholders has the right to vote in all meetings and assent or dissent all decisionsPreference Shares has no voting or decision making powers
Equity Shares are lifetime investments in a companyAfter a fixed period, preference shares will redeem by the company and return the investment based on the offer letter
Equity Shares will get capital, only if anything left in the company at the time of winding up, after paying all liabilities.Preference Shares has the preference over equity shares on repayment of capital at the time of winding up.

Author

Gayatri Dhote

Leave a comment

Your email address will not be published. Required fields are marked *

şehirler arası nakliyat manisa şehirler arası nakliyat şehirler arası nakliyat şehirler arası nakliyat şehirler arası nakliyat profesyonel evden eve nakliyat ofis taşıma sigortalı evden eve nakliyat istanbul evden eve nakliyat
error: Content is protected !!!