Sunday, July 25, 2010

Types of Preference Shares

Cumulative Preference Shares
This is where preference shares will be issued within the condition that the unpaid cumulative preference dividend will be carried forward until it is paid.

Non Cumulative Preference Shares
This is where unpaid preference dividend will not be carried forward in the future therefore if the company did not pay a dividend during a particular year then that dividend will be lost to the shareholders forever.

Redeemable Preference Shares
This is where the company will issue preference shares with the condition that the share capital collected will be repaid after a specific time period.


Irredeemable Preference Shares
The company does not expect to repay the irredeemable preference share capital collected. Therefore the company will be paying specified dividend through out the time period over which it is in issue.

Participating Preference Shares
This is where preference shares will be issued with a condition stating that the preference shareholder will be paid the specified dividend plus an additional dividend if the ordinary shareholders are paid a dividend more than a specified amount.

Convertible Preference Shares
This is where the company will issue preference shares with the condition of it being converted in to ordinary shares after a specified time period. Therefore the company does not have to repay the share capital collected.

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