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Types of Shares

This document outlines 8 types of preference shares: 1. Redeemable preference shares can be repaid by the company after a fixed period. 2. Irredeemable preference shares do not have an agreement for redemption. 3. Convertible preference shares can be converted to equity shares according to the issue terms. 4. Non-convertible preference shares cannot be converted to equity shares.

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906 views1 page

Types of Shares

This document outlines 8 types of preference shares: 1. Redeemable preference shares can be repaid by the company after a fixed period. 2. Irredeemable preference shares do not have an agreement for redemption. 3. Convertible preference shares can be converted to equity shares according to the issue terms. 4. Non-convertible preference shares cannot be converted to equity shares.

Uploaded by

priyesh04
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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1.

2 Types of Preference Shares


) Redeemable Preference Shares: A company may issue this type of shares on the
condition that the company will repay the amount of share capital to the holders of this
category of shares after the fixed period or even earlier at the discretion of the company.
Section 80 of the Companies Act, 1!" deals with the redemption of preference shares.
ii) Irredeemable Preference Shares: #he preference shares, which do not carry the
agreement of redemption are $nown as irredeema%le preference shares.
iii) Convertible Preference Shares: #his type of shares en&oy the right to the holder to
get them converted into e'uity shares according to the terms and conditions of the issue.
iv) Non-convertible Preference Shares: #he holders of these shares do not en&oy the
right to get the shares converted into e'uity shares. (nless otherwise stated, )reference
shares are non*converti%le.
v) Participatin Preference Shares: #he holder of this type of preference shares en&oy
the right to participate in the surplus profits, if any, after the e'uity shareholders have
%een paid dividend at a rate fixed in the A+,. So the shareholders get additional
dividend with their normal dividend.
vi) Non-participatin Preference Shares: #hese shares carry only a fixed rate of
dividend without any right to get additional dividend. (nless otherwise stated, #he
preference shares are non*participating.
vii) C!m!lative Preference Shares: #he cumulative preference shares carry the right to
a fixed amount of dividend. #he holders of these shares are entitled to get dividend out of
future profit if current year-s profit is insufficient for the same. So, the dividend on these
shares accumulates till the final payment.
viii) Non-c!m!lative Preference Share: .n this case the dividend for the shareholders
does not accumulate. .f there is no sufficient profit, this type of preference shareholders
will not get any dividend. .n this case, the dividend will %e lapsed and there will %e no
arrear dividend

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