Question

What preferential rights are enjoyed by preference shareholders? Explain.

Answer 1

Following preferential rights are enjoyed by the preference shareholders: 

• They get dividend at a fixed rate and dividend is given on these shares before any dividend on equity shares. 
• When company winds up, preference shares are paid before equity shares. 
• Preference shares also have a right to participate in excess profits left after payment being made to equity shares. 
• 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