Question

Explain the preferential rights enjoyed by Preference Shareholders over Equity Shareholders. 

Answer 1

Following are the preferential rights enjoyed by preference shareholder over equity shareholder. 

1 Preference at the time of payment of dividend:- receiving a fixed rate of dividend, out of the net profits of the company, before any dividend is declared for equity shareholders; 

2. Preference in the repayment of capital:- Preference shareholders have a preferential right of repayment over equity shareholders in the event of liquidation of a company;