Preference Shares

Topics: Stock market, Stock, Democracy, Shareholder, Share, Corporate finance / Pages: 5 (1178 words) / Published: Jun 3rd, 2012
Preference Shares
As in section 4 of Company Act 1965, it interpret preference share as “a share by whatever name called, which does not entitle the holder thereof to the right to vote at the general meeting or to any right to participate beyond a specified amount in any distribution whether by way of dividend, or redemption, in wind up, or otherwise.” (the library book)
Besides that, section 66(1) of Company Act 1965 also states that “No company shall allot any preference shares or convert any issued shares into preference shares unless there is set out in its memorandum or articles the rights of the holders of those shares with respect to repayment of capital, participation in surplus assets and profits, cumulative or non-cumulative dividends, voting, and priority of payment of capital and dividend in relation to other shares or other classes of preference shares.” (the library book) Features of Preference Share
Firstly, preference shareholders will have their dividends paid first, from the profits made by the company, before the ordinary shareholders.
Secondly, preference shareholders enjoy fixed dividends, their return on investments, from the company where their shares are bought. That is to say, whether the company performed well or bad in the year, the preference shareholder will get their dividends at a fixed rate (e.g. 10% preference share), except for those participating shareholders (this will be explain below in the “Types of Preference Shareholders”).
Next, the preference shareholders also have the priority to get their capital back upon the liquidation of the company. They stand in front of the ordinary shareholders in the fixed list of priorities.
Next, although preference shareholders have the right to attend any general meeting held by the company, they do not have the right to vote. They can only vote in a general meeting, unless under some circumstances which are provided in s148(2), CA 1965(refer to appendix?). However, they do have

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