What are preference shares?

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What are preference shares?

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William 1 year 1 Answer 268 views Silver 0

Answer ( 1 )

  1. There are two types of shares that can be issued by a company namely equity shares and preference shares.

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    Explanation to Section 43 of the Companies Act, 2013 provides that a preference share or preference capital is that part of share capital which fulfills both the requirements:

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    1. With respect to dividend, it carries preferential rights to be paid a fixed amount or amount at a fixed rate.
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    3. With respect to capital, It carries on winding up or repayment of capital a preferential right.
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    In general preference shareholders are considered as creditors of the company, and, they do not have voting rights.

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    Types of preference shares:

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    1. Participating & non-participating preference shares
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    3. Cumulative & non-cumulative preference shares
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    5. Redeemable Preference shares
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    7. Convertible & non-convertible preference shares
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