1. Cumulative Preference Shares –
Due to losses or lesser profits in a financial year, a company may not be able to pay a dividend on preference shares. The dividend on cumulative preference shares is carried forward. For example – If a company did not earn profit in 2010 – 11 but it earns profit in 2011 – 12, then the shareholders have to pay the cumulative amount of 2010 – 11 & 2011 – 12 in 2011 – 12.
2. Non – cumulative Preference Shares –
Non – cumulative preference shares do not get a dividend in arrears. These shareholders lose their dividend in the year of loss.
3. Participating Preference Shares –
It provides the right to certain preference shareholders to participate in profits after a specified fixed dividend contracted for is paid.
4. Non Participating Preference Shares –
It typically receives an amount equal to the initial investment plus accrued and unpaid dividends upon a liquidation event.
5. Convertible Preference Shares –
These are fixed-income securities that the investor can choose to turn into a certain no. of shares of the company’s stock. These have the option of being converted into equity shares after a specific period of time.
6. Non – convertible Preference Shares –
These are the preference shares that do not include shares which are convertible into equity shares of the issuer at a later date, with or without the option of the holder.
7. Redeemable preference shares –
A company may issue these shares on the condition that the company will repay the amount of share capital to the holders of this category of shares after the fixed time period or even earlier than that at the discretion of the company.
8. Non – redeemable preference shares –
These are paid back at the time of liquidation of the company.
