{"id":6837,"date":"2021-09-26T20:12:26","date_gmt":"2021-09-26T14:42:26","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=6837"},"modified":"2025-10-08T13:21:49","modified_gmt":"2025-10-08T07:51:49","slug":"features-of-preference-shares","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/features-of-preference-shares\/","title":{"rendered":"Top 10 Features of Preference Shares &#8211; Scholarszilla"},"content":{"rendered":"\n<h2 class=\"wp-block-heading has-text-align-center\"><strong>Features of Preference Shares<\/strong><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" width=\"1024\" height=\"576\" data-src=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Features-of-Preference-Shares-1-1-1024x576.jpg\" alt=\"Features of Preference Shares\" class=\"wp-image-6847 lazyload\" title=\"\" data-srcset=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Features-of-Preference-Shares-1-1-1024x576.jpg 1024w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Features-of-Preference-Shares-1-1-300x169.jpg 300w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Features-of-Preference-Shares-1-1-768x432.jpg 768w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Features-of-Preference-Shares-1-1-1536x864.jpg 1536w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Features-of-Preference-Shares-1-1-640x360.jpg 640w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Features-of-Preference-Shares-1-1.jpg 1920w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/576;\" \/><figcaption class=\"wp-element-caption\"><strong><strong>Features of Preference Shares<\/strong><\/strong><\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\">What are Preference Shares?<\/h3>\n\n\n\n<p><strong>Preference Shares:<\/strong> As the name indicates, these shares have certain preferential rights distinct from those attached to equity shares.<br>The shares which carry the following preferential rights are termed as preference shares :<br><strong>a) A preferential right as to payment of dividend during the lifetime of company.<br>b) A preferential right as to the return of capital in the event of winding up of company.<\/strong><\/p>\n\n\n\n<p>The holder of <a href=\"https:\/\/www.bloombergquint.com\/financial-terms\/what-is-preference-shares-definition-meaning-and-basics-of-preference-shares\" target=\"_blank\" rel=\"noreferrer noopener\">preference share<\/a> have a prior right to receive a fixed rate of dividend before any dividend is paid to equity shares. The rate of dividend is prescribed at the time of issue.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/public-deposits-meaning\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/public-deposits-meaning\/\" target=\"_blank\" rel=\"noreferrer noopener\">Public Deposit <\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/gdr-meaning\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/gdr-meaning\/\" target=\"_blank\" rel=\"noreferrer noopener\">Global Depository Receipt (GDR)<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/features-of-shares\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/features-of-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\">Features of Shares<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-equity-shares\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-equity-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\">Meaning of Equity Shares<\/a><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Features of Preference Shares <\/h3>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">1) Preference for dividends:<\/span><\/strong> <\/p>\n\n\n\n<p>Preference shares have the first charge on the distributable amount of annual net profit. The dividend is payable to preference shareholders before it is paid to equity shareholders.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">2) Preference for repayment of capital:<\/span><\/strong><\/p>\n\n\n\n<p>Preference shareholders have a preference over equity shareholders regarding the return of capital when the company is liquidated. It saves preference shareholders from capital losses.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">3) Fixed Return:<\/span><\/strong><\/p>\n\n\n\n<p>These shares carry dividend at fixed rate. The rate of dividend is pre-determined at the time of issue. It may be in the form of fixed sum or may be calculated at fixed rate. The preference shareholders are entitled to dividend which can be paid only out of profits. If the directors, in financial crisis, decide not to pay dividend, the preference shareholders have no claim for dividend.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">4) Nature of Capital:<\/span><\/strong><\/p>\n\n\n\n<p>Preference shares do not provide permanent share capital. They are redeemed after certain period of time. A company can not issue irredeemable preference shares. Preference capital is generally raised at a later stage, when the company gets established. Preference share capital is safe capital as the rate of dividend and market value does not fluctuate.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">5) Market Value:<\/span><\/strong><\/p>\n\n\n\n<p>The market value of preference share does not change as the rate of dividend payable to them is fixed. The capital appreciation is considered to be low as compared with equity shares.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">6) Voting rights:<\/span><\/strong><\/p>\n\n\n\n<p>The preference shares do not have normal voting rights. They do not enjoy right of control on the affairs of the company. They have voting rights on any resolution of the company directly affecting their rights e.g.: Change in terms of repayment of capital, dividend payable to them are in arrears for last two<br>consecutive years, etc.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">7) Risk:<\/span><\/strong><\/p>\n\n\n\n<p>The investors who are cautious, generally purchase preference shares. Safety of capital and steady return on investment are advantages attached with preference shares. These shares are boon for shareholders during depression period when interest rate is continuously falling.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">8) Face Value:<\/span><\/strong><\/p>\n\n\n\n<p>The face value of preference shares is relatively higher than that of equity shares. They are normally issued at a face value of Rs. 100\/-.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">9) Rights or Bonus Issue:<\/span><\/strong><\/p>\n\n\n\n<p>Preference shareholders are not entitled for Rights or Bonus issues.<\/p>\n\n\n\n<p><strong><span class=\"has-inline-color has-vivid-purple-color\">10) Nature of Investor:<\/span><\/strong><\/p>\n\n\n\n<p>Preference shares attract moderate type of investors. Investors who are conservative, cautious, interested in safety of capital and who want steady return on investment generally purchase preference shares.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":6847,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[10],"tags":[2870],"class_list":["post-6837","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-educational-blogs","tag-features-of-preference-shares"],"_links":{"self":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/comments?post=6837"}],"version-history":[{"count":7,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6837\/revisions"}],"predecessor-version":[{"id":39460,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6837\/revisions\/39460"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media\/6847"}],"wp:attachment":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media?parent=6837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/categories?post=6837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/tags?post=6837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}