Types of Preference Shares

The important types of preference shares are as follows −

Cumulative Preference Shares

If dividend is not paid at the end of any year due to loss or inadequate profit, the dividend will accumulate and will be paid in the forthcoming years.

Non-Cumulative Preference Shares

Dividends cannot accumulate in the case of non-cumulative preference shares.

Participating Preference Shares

In addition to basic preferential rights, these shares may carry one or more of the following participation rights −
● Receiving dividends out of surplus profits left after paying dividends to equity shareholders.
● Having shares in surplus assets, which remain after the winding-up of the company.

Non-Participating Preference Shares

In addition to basic preferential rights, these shares do not carry any of the following participation rights −
● Receiving dividends out of surplus profits left after paying dividends to equity shareholders.
● Having shares in surplus assets which remains after winding up of the company.

Convertible Preference Shares

These shares can be converted into equity shares on or after specific dates as mentioned in the prospectus.

Non-Convertible Preference Shares

These shares cannot be converted into equity shares.

Redeemable Preference Shares

These shares can be redeemed by the company on or after a certain date after giving the prescribed notice.

Irredeemable Preference Shares

These types of shares cannot be redeemed by the company. The shares are redeemed only on the occasion of winding up.