LEGAL ASPECTS OF BUSINESS

SUBMITTED TO,
DR .VIJAYA KUMAR
HOD
MBA

SUBMITTED BY,
SK.MASTANVALI & P.SREERAJ
REG NO : 18JR1E0052 & 18JR1E0053
MBA
PREFERENCE
SHARES
INTRODUCTION
• Companies issue different types of shares to
mop-up funds from various investors. Before
Companies Act, 1956, Public companies used
to issue three types of shares, i.e. Preference
shares, ordinary shares and deferred shares.
The Companies Act, 1956 has limited the type
of sharestoonlytwo, i.e.
• Preference Shares & Equity Shares
 MEANING
• As the name suggests, these
shareshavesome preferences as
comparedtoothertypes of shares.
These shares are given twotypes
of preferences –
• Payment of Dividend
• Repayment of capital at the
time of liquidation
• A fixed rate of dividend is paid on preference share
capital.
• Preference share holders have no voting rights ; so they
havenosayinthe managementof thecompany.
 TYPES
• Preference Shares are types : -

• Cumulative Preference Shares : These share

holders have a right to claim dividend for those years
alsoforwhichthereareno profits.
• Non-Cumulative Preference Shares : These
share holders are paid dividend if there are sufficient
profits.
• Redeemable Preference Shares : These shares
are issued on the terms where they are liable to be
redeemedateitherafixed time,or thecompany'soption
or at the shareholders option. In other words, the
company can buy back preference shares at an agreed
timeand price.
• Irredeemable Preference Shares : Those shares
which cannot be redeemed unless the company is
liquidated.
• Participating Preference
Shares : The holders of these
shares participate in the
surplusprofitsof the company.
• Non-Participating
Preference Shares :
They do not have such
rights to participate or
claim for a part inthe
surplus profits of a
company.
• Convertible Preference Shares : The holders of
thesesharesmaybegivenaright toconverttheirholding
intoequityshares afteraspecificperiod.
• Non-Convertible Preference Shares : Those
shareswhichcannotbeconvertedintoequity sharesare
known as non-convertible preference shares.