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What are “preference shares”?

Companies can offer preference shares with different rights and any combination of features. Preference shares offer investors another layer of protection. For example, if a company have financial problems, preference shares have the priority to claim on the assets of the company. In addition, preference shares offer greater income security when it comes to dividends. Dividends to shareholders are paid first to preferred shareholders. There are many types of preference shares. For instance, Cumulative share is a common type of preference shares. Accordingly, if a company have difficulty to allocate dividends at one period it has to save those dividends for the preferred shares and give them the dividend in the next period before the common stocks shareholders. Preference shares have no voting rights. Therefore, preferred shareholders usually have no control over the company’s management.

By | 2016-11-04T16:56:04+00:00 October 15th, 2016|Legal Definitions|0 Comments

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Jouman Abbud
Third year Law & Accounting student at the IDC Herzliya. Dreams of becoming a leading lawyer and leaving a mark on the industry