There are nine different types of preference shares given below:
- Convertible Preference Shares
- Non-Convertible Preference Shares
- Redeemable Preference Shares
- Non-Redeemable Preference Shares
- Participating Preference Shares
- Non-Participating Preference Shares
- Cumulative Preference Shares
- Non-Cumulative Preference Shares
- Adjustable Preference Shares
Convertible Preference Shares
Convertible preference shares are those shares that can be easily converted into equity shares.
Non-Convertible Preference Shares
Non-Convertible preference shares are those shares that cannot be converted into equity shares.
Redeemable Preference Shares
Redeemable preference shares are those shares that can be repurchased or redeemed by the issuing company at a fixed rate and date. These types of shares help the company by providing a cushion during times of inflation.
Non-Redeemable Preference Shares
Non-redeemable preference shares are those shares that cannot be redeemed or repurchased by the issuing company at a fixed date. Non-redeemable preference shares help companies by acting as a lifesaver during times of inflation.
Participating Preference Shares
Participating preference shares help shareholders demand a part in the company’s surplus profit at the time of the company’s liquidation after the dividends have been paid to other shareholders.
However, these shareholders receive fixed dividends and get part of the surplus profit of the company along with equity shareholders.
Non-Participating Preference Shares
These shares do not benefit the shareholders the additional option of earning dividends from the surplus profits earned by the company, but they receive fixed dividends offered by the company.
Cumulative Preference Shares
Cumulative preference shares are those type of shares that gives shareholders the right to enjoy cumulative dividend payout by the company even if they are not making any profit.
These dividends will be counted as arrears in years when the company is not earning profit and will be paid on a cumulative basis the next year when the business generates profits.
Non - Cumulative Preference Shares
Non - Cumulative Preference Shares do not collect dividends in the form of arrears. In the case of these types of shares, the dividend payout takes place from the profits made by the company in the current year.
So if a company does not make any profit in a single year, then the shareholders will not receive any dividends for that year. Also, they cannot claim dividends in any future profit or year.
Adjustable Preference Shares
In the case of adjustable preference shares, the dividend rate is not fixed and is influenced by current market rates.
