Prefrence Shares

1. Submitted to: Mr. Himal parikh SUBMITTED BY: prashant maharshi PREFRENCE SHARES

2. PREFRENCE SHARES Preference shares are those which have preferential right to the payment of dividend during the life-time of the company and a preferential right to the return of capital when the company is wound up.

3. TYPES OF PREFERENCE SHARES Cumulative and Non cumulative. Participating and Non Participating.  Convertible and Non Convertible. Redeemable and Non Redeemable.

4. CUMULATIVE AND NON CUMULATIVE Holders of Cumulative preference shares are entitled to recover the arrears of preference dividend before any dividend is paid on equity shares. In the case of Non- cumulative Preference shares arrears of dividend do not accumulate and hence, if dividend is to be paid to equity shareholder in any year, dividend at a fixed rate for only 1 year will have to be paid to preference shareholder before equity dividend is paid.

5. Participating and Non Participating Participating Preference shareholders are not only entitle to only fixed rate of dividend but have the right to receive any surplus profit which remains after dividend has been paid at a certain rate to equity shareholders . Non Participating Preference shareholders are entitle to only fixed rate of dividend.

6. Convertible and Non Convertible Holder of Convertible Preference shares enjoy the right to get preference share converted into equity shares according to the terms of issue . Holder of Non Convertible Preference shares do not enjoy any such right.

7. Redeemable and Non Redeemable   Redeemable Preference shares are those preference shares whose amount can be returned by the company to their holder within the life time of the company subject to the terms of the issue and fulfillment of certain legal conditions laid down in sec 80 of the companies act. The amount of Non Redeemable Preference shares can be returned only company is wound up.

8. BENEFITS Helpful in raising long-term capital for a company. Have first claim on profits and proceeds from the sale of the company’s asset at the time of bankruptcy. Have fixed rate of dividend for fixed number of years. Guaranteed Rate of Return.

9. DRAWBACKS Not traded in market like ordinary shares. Not available to retail investors. Not advantageous to investors form the point of view of control & management as preference share do not carry voting rights. Cost of raising preference share capital is higher.

10. WHO CAN BUY PREFRENCE SHARES? Financial Institution. Lending firms. Other investors through brokerage firm.

11. HOW TO SELL THESE SHARES? Through private placement via broker at a negotiated price. Price one receives depend upon financial state of the company. One may have to sell at discount which is negotiated price not the market price.

12. Thank You…