Question

A shareholder who can vote conditionally he is ____________.

• A. equity shareholder
• B. preference shareholder
• C. member
• D. none of the above.

Answer 1

Answer: (B)

preference shareholder

As per Explanation(ii) to section 42 of the Companies Act, 2013 (‘the Act’), the term preference shares mean and includes that part of the share capital the holders of which have a preferential right overpayment of dividend and repayment of share capital in the event of winding up of the company. Further, as per Explanation(iii) to section 42, when a certain class of shares has either of the following features, the same shall be deemed to be preference shares. In addition to the preferential right to receive dividend, the shareholders have a right to participate either fully or to a limited extent in the capital not having preferential treatment. Preferred stock shareholders also typically do not hold any voting rights, but common shareholders usually do.

Generally, voting rights are available only to the equity shareholders of the company. Preference shareholders do not enjoy normal voting rights like equity shareholders. But under certain circumstances voting rights will also be available to the preference shareholders of the company.