question_answer

What preferential rights are enjoyed by preference shareholders? Explain.

Answer:

Ans.     Following preferential rights are enjoyed by the preference shareholders:

(a) They get dividend at a fixed rate and dividend is given on these shares before any dividend on equity shares.

(b) When company winds up, preference shares are paid before equity shares.

(c) Preference shares also have a right to participate in excess profits left after payment being made to equity shares.

(d) They also have a right to participate in the premium at the time of redemption.

In lieu of these preferential rights, their voting rights are taken i.e. they are not eligible for voting.