Features of Preference Shares

There are different distinguishingfeatures of preference sharesThese shares are types of securities that are issued by the companies or corporations to their investors with the primary aim of generating funds for the company or corporation.
These shares are different from the common stocks and are valued highly. The preference shares are provided with the voting rights but there are exceptions too. At the same time, the dividends that are paid to the preference share holders are generally paid earlier than other forms of shares.

Again, at times when the corporation becomes bankrupt, the preference share holders are paid out prior to the other share holders termed as common stock holders. The preferred or preference share holders are provided with several facilities. The prime facility is regarding the payments of dividends.
At the same time, if the dividends are not paid by the corporation to the preference share holders, the amount of the dividend is credited to the account of the share holder and is paid to the share holder with the next year’s dividend.
There are some another features of the preference shares. There are certain types of preferred or preferential shares that provide the shareholders with the rights to play an important role in the process of taking crucial decisions for the company. This voting right is provided to those preferred shares where the dividends are accumulating for a specific period.

On the other hand, the preferred shares are designed with some specific planning for the security of the share. These shares are also very useful in forbidding uncongenial takeovers. For the purpose, the preference shares are designed with forced exchange characteristics that can be used at time of hostile takeovers. At the same time, issuing new preference shares is possible but any kind of senior claim for new shares is forbidden.

Apart from these owner-friendly features of preference shares, there are some other features also that may not be in proper harmony with the shareholders. One of such feature is the call provision. According to this provision, the preference share issuing company or corporation may buy-back the shares from the market whenever the situation demands so.

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Last Updated on : 27th June 2013

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