{"id":2285,"date":"2019-08-12T05:28:26","date_gmt":"2019-08-12T05:28:26","guid":{"rendered":"https:\/\/commerceiets.com\/?p=2285"},"modified":"2019-08-12T05:28:26","modified_gmt":"2019-08-12T05:28:26","slug":"different-types-of-preference-shares","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/different-types-of-preference-shares\/","title":{"rendered":"DIFFERENT TYPES OF PREFERENCE SHARES"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/different-types-of-preference-shares\/#DIFFERENT_TYPES_OF_PREFERENCE_SHARES\" title=\"DIFFERENT TYPES OF PREFERENCE SHARES\">DIFFERENT TYPES OF PREFERENCE SHARES<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/different-types-of-preference-shares\/#PREFERENCE_SHARES\" title=\"PREFERENCE SHARES\">PREFERENCE SHARES<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"DIFFERENT_TYPES_OF_PREFERENCE_SHARES\"><\/span>DIFFERENT TYPES OF PREFERENCE SHARES<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h4 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"PREFERENCE_SHARES\"><\/span><strong>PREFERENCE SHARES<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">Preference shares are those which carry the following two preferential\nrights:<\/p>\n\n\n\n<ul><li>They have a right to receive dividend at a fixed rate before any dividend is paid on the equity shares.<\/li><li>When the company is wound up, they have a right to the return of capital before that of equity shares.<\/li><\/ul>\n\n\n\n<p class=\"has-medium-font-size\">Also, the preference shares may carry some more rights such as the right to participate in excess profits when a specified dividend has been paid on the equity shares or the right to receive a premium at the time of redemption. The following are the Different Types of Preference Shares:<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img loading=\"lazy\" decoding=\"async\" width=\"960\" height=\"720\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/08\/Slide1-7.jpg\" alt=\"\" class=\"wp-image-2289\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/08\/Slide1-7.jpg 960w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/08\/Slide1-7-300x225.jpg 300w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/08\/Slide1-7-768x576.jpg 768w\" sizes=\"(max-width: 960px) 100vw, 960px\" \/><figcaption>DIFFERENT TYPES OF PREFERENCE SHARES<\/figcaption><\/figure>\n\n\n\n<p style=\"text-align:center\" class=\"has-background has-medium-font-size has-light-green-cyan-background-color\"><strong>WITH REFERENCE TO DIVIDEND<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>CUMULATIVE PREFERENCE SHARES<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Cumulative Preference Shares are those preference shares, the holders of which are entitled to recover the arrears of preference dividend, before any dividend is paid on equity shares. This means that if in any year, the profits of the <a href=\"https:\/\/commerceiets.com\/joint-stock-company\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"company (opens in a new tab)\">company<\/a> are insufficient to pay dividend on these shares, the dividend keeps on accumulating until it is fully paid.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Example:<\/strong> If dividend has not been paid for the years 2017 and 2018 on 8% cumulative preference shares and the company wants to distribute dividend on equity shares for the year 2019, a total of 24% dividend (8% of 2017+ 8% of 2018+ 8% of 2019) will have to be paid first on preference shares before the payments of any dividend to equity shares. The arrears of dividend on these shares are shown in the Balance Sheet as a commitment under \u2018Contingent Liabilities and Commitments.\u2019<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>NON-CUMULATIVE PREFERENCE SHARES<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">The holders of such shares get a fixed amount of dividend\nout of the profits of each year. If no dividend is declared in any year due to\nany reasons, such shareholders get nothing, nor can they claim unpaid dividend\nof any year in any subsequent year.<\/p>\n\n\n\n<p style=\"text-align:center\" class=\"has-background has-medium-font-size has-light-green-cyan-background-color\"><strong>WITH REFERENCE TO PARTICIPATION IN SURPLUS PROFITS<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>PARTICIPATING PREFERENCE SHARES<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">The Articles of Association of a company may provide that\nafter dividend has been paid to the Equity shareholders, the holders of\nPreference Shares will also have a right to participate in the remaining\nprofits. The Preference Shares carrying this right are called Participating\nPreference Shares.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>NON- PARTICIPATING PREFERENCE SHARES<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Preference shares which do not carry the right to\nparticipate in the profits remaining after Equity shareholders have been paid dividend\nare Non-Participating Preference Shares.<\/p>\n\n\n\n<p style=\"text-align:center\" class=\"has-background has-medium-font-size has-light-green-cyan-background-color\"><strong>WITH REFERENCE TO CONVERTIBILITY<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>CONVERTIBLE PREFERENCE SHARES<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">These are the shares that carry the right to get converted\ninto Equity Shares at their option according to the terms of issue.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>NON-CONVERTIBLE PREFERENCE SHARES<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">When the holders of preference shares have not been given\nthe right of getting their preference shares converted into equity shares, such\nshares are called Non- Convertible Preference Shares. <\/p>\n\n\n\n<p style=\"text-align:center\" class=\"has-background has-medium-font-size has-light-green-cyan-background-color\"><strong>WITH REFERENCE TO REDEMPTION<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>REDEEMABLE PREFERENCE SHARES<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Redeemable Preference shares are those preference shares\nwhich are redeemed by the company at the time specified for the repayment or\nearlier. The repayment of amount is termed as Redemption. These shares are particularly\nissued by the Company Limited by Shares and redeemed as the provisions of\nArticles of Association. The maximum time limit for repayment of preference\nshares must not exceed 20 years.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>IRREDEEMABLE PREFERENCE SHARES<\/strong><\/p>\n\n\n\n<p class=\"has-medium-font-size\">Irredeemable Preference Shares are those Preference Shares\nthe amount of which can be returned by the company to the holders of such\nshares when the company is wound up.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">The Companies Act, 2013 does not permit issue of\nIrredeemable Preference Shares. &nbsp;&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>DIFFERENT TYPES OF PREFERENCE SHARES PREFERENCE SHARES Preference shares are those which carry the following two preferential rights: They have a right to receive dividend at a fixed rate before any dividend is paid on the equity shares. When the company is wound up, they have a right to the return of capital before that&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/different-types-of-preference-shares\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;DIFFERENT TYPES OF PREFERENCE SHARES&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":2288,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19,102],"tags":[128],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2285"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=2285"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2285\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/2288"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=2285"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=2285"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=2285"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}