Corporate organizations are willing to raise the funds or raise the working capital through primary market, they issue equity shares and preference shares and debentures (Under Indian Company Low).
Preference Shares means shares which fulfill the following two conditions (As per Companies Act. 1956, Sec. 80 ).
a) It carries Preferential rights in respect to Dividend at fixed amount or at fixed rate i.e. dividend payable is on fixed figure or percent and this dividend must paid before the holders of the equity shares.
b) It also carries preferential right in regard to payment of capital on winding up or otherwise. It means the amount paid on preference share must be paid back to preference shareholders before anything in paid to the equity shareholders. In other words, preference share capital has priority both in repayment of dividend as well as capital.
In case the company is wound up and its assets (land, buildings, offices, machinery etc.) are being sold, the money that comes from this sale is given to the shareholders. Preference shareholders get the money first. Their accounts are settled before that of the equity shareholders. So Preference shares are safer.
What’s Good about Preference Shares :: -
1. Assured return.
2. Fixed return.
3. Fixed maturity period.
4. They get priority over equity shares.
5. Preference shares are safer.
As you see, preference shares are not really stock – they have many features of bonds, such as assured returns. In fact, they are like fixed income instruments – their value remains the price at which the company issued them, while their dividends are fixed, just like interest payments.
For more details, please contact ::
( E-mail :: [email protected] )
Preference Shares means shares which fulfill the following two conditions (As per Companies Act. 1956, Sec. 80 ).
a) It carries Preferential rights in respect to Dividend at fixed amount or at fixed rate i.e. dividend payable is on fixed figure or percent and this dividend must paid before the holders of the equity shares.
b) It also carries preferential right in regard to payment of capital on winding up or otherwise. It means the amount paid on preference share must be paid back to preference shareholders before anything in paid to the equity shareholders. In other words, preference share capital has priority both in repayment of dividend as well as capital.
In case the company is wound up and its assets (land, buildings, offices, machinery etc.) are being sold, the money that comes from this sale is given to the shareholders. Preference shareholders get the money first. Their accounts are settled before that of the equity shareholders. So Preference shares are safer.
What’s Good about Preference Shares :: -
1. Assured return.
2. Fixed return.
3. Fixed maturity period.
4. They get priority over equity shares.
5. Preference shares are safer.
As you see, preference shares are not really stock – they have many features of bonds, such as assured returns. In fact, they are like fixed income instruments – their value remains the price at which the company issued them, while their dividends are fixed, just like interest payments.
For more details, please contact ::
( E-mail :: [email protected] )
