Preferred shares, definition and meaning
Preferred shares are securities, which do not carry voting rights, however, in the Charter of the company shareholders may be provided otherwise.
Distinguish between non-cumulative, cumulative and preferred shares with the participation.
Non-cumulative preference shares
Non-cumulative preferred stock is preferred stock, the holders of which may not receive dividends, when a joint stock company is skipped their regular payment.
Cumulative preference shares
Cumulative preference shares are shares, guarantee dividends, even in spite of the missing their payments: income, which got paid to the holders of shares in бесприбыльный year the company will compensate them in subsequent years.
Preferred shares of participation are securities, which in addition to the fixed dividend, give the shareholder the right, along with the ordinary shares, have a share in the profits.
Preferred shares
Dividends on preferred shares is paid until payment on common shares and after payments on the bonds. Usually the owner of the preferred shares shall be guaranteed a fixed dividend as a percentage of the nominal value of the shares.
I.e a certain part of the fixed interest rate, or a certain part of the profits must be paid on them as income. But if the meeting of shareholders approved the decision to pay dividends, the next meeting, the holders of these shares have the same rights, and that the owners of the ordinary shares, and this means that they will have the right to vote, but this continue until the company does not start again the payment of dividends to the owners of preferred shares.
Under no conditions the preference shares may obtain the right of ordinary shares
Preferred shares can be converted into ordinary shares in the event, if the company decides to break free from the complex structure of the share capital (as the company no longer need it).
There is an opinion that the preferred shares, as the appearance of shares gradually dies, as many Russian and Western companies refuse to issue preference shares and preferred ordinary, with what is it connected? First of all, this is done in order to have some kind of объеденная the structure of the share capital, making the calculation. For example, to carry out the calculation of market capitalization of the company, which consists of those and other shares, initially will need to calculate the exact sum of the value of all the ordinary shares, and then all of the preferred shares, then put them together and, as a rule, the ordinary shares of the same Issuer have greater liquidity than preferred.
It should be noted that unlimited output of preferred shares, are a very negative consequences, and first of all it is the "consumption" of the Charter of the Fund. In connection with this, in most countries, there are certain restrictions on the issue of these shares. In our country, their publication is limited to 10 % of the authorized Fund.
