Question

Justify the following statement:

Preference Shares do not carry normal voting rights.

Answer 1

• Preference shares enjoy priority or preference over equity shareholders as regards payment of dividends and repayment of capital.
• They carry a fixed rate of dividend.
• They do not take much risk as they are cautious investors.
• They attend class meetings if they have any problem affecting their interests or dividend is not paid to them for two or more consecutive years.
• As they do not take risks, they do not attend general meetings or take part in the management nor vote at the meetings.
• Thus, it is rightly said, that the preference shares do not carry voting rights.