Discuss the various types of preference shares.
Discuss the various types of preference shares.
1. Redeemable and Irredeemable Preference shares—
Redeemable preference shares are those which are redeemed on or after a specified date as per the terms of their issue. Preference shares which can’t be redeemed during the life time of the company are known as irredeemable preference shares.
2. Convertible and Non-convertible Preference shares - Preference shares which can be converted into equity shares within a specified time period are known as convertible preference shares. The preference shares which do not carry such a right are known as non-convertible preference shares.
3. Cumulative and Non-cumulative Preference shares—Preference shares on which arrears of dividend (outstanding dividends for a specific year not paid because of inadequate profits) are paid in subsequent years are known as cumulative preference shares. Non-cumulative preference shares are those on which dividend not paid in any year and is not accumulated.
4. Participating and Non-participating Preference shares—Participating preference shares gives preferential rights to their owners—
(a) First, extra dividend may be paid if the surplus of profit is significant-after paying dividend on equity shares. (b) second, in the case of winding up of the company, participating preference share get a part of surplus of assets after paying to equity shareholders. Non participating preference shares do not have such rights.
1. Redeemable and Irredeemable Preference shares—
Redeemable preference shares are those which are redeemed on or after a specified date as per the terms of their issue. Preference shares which can’t be redeemed during the life time of the company are known as irredeemable preference shares.
2. Convertible and Non-convertible Preference shares - Preference shares which can be converted into equity shares within a specified time period are known as convertible preference shares. The preference shares which do not carry such a right are known as non-convertible preference shares.
3. Cumulative and Non-cumulative Preference shares—Preference shares on which arrears of dividend (outstanding dividends for a specific year not paid because of inadequate profits) are paid in subsequent years are known as cumulative preference shares. Non-cumulative preference shares are those on which dividend not paid in any year and is not accumulated.
4. Participating and Non-participating Preference shares—Participating preference shares gives preferential rights to their owners—
(a) First, extra dividend may be paid if the surplus of profit is significant-after paying dividend on equity shares. (b) second, in the case of winding up of the company, participating preference share get a part of surplus of assets after paying to equity shareholders. Non participating preference shares do not have such rights.
