Preference shares are those, which enjoy the following two preferential rights:

(i) Dividend at a fixed rate or a fixed amount on these shares before any dividend on equity shares.

(ii) Return of preference share capital before the return of equity share capital at the time of winding up of the company. Preference shares also have a right to participate or in part in excess profits left after been paid

to equity shares, or has a right to participate in the premium at the time of redemption. But these shares do not carry voting rights.

Types Of Preference Shares Following are the major types of preference shares:

(i) Cumulative Preference Shares: When unpaid dividends on preference shares are treated as arrears and are carried forward to subsequent years, then such preference shares are known as cumulative

preference shares. It means unpaid dividend on such shares is accumulated till it is paid off in full.

(ii) Non-cumulative Preference Shares: Non-cumulative preference shares are those type of preference shares, which have right to get fixed rate of dividend out of the profits of current year only.

(iii) Redeemable Preference Shares: Those preference shares, which can be redeemed or repaid after the expiry of a fixed period or after giving the prescribed notice as desired by the company, are known as

redeemable preference shares.

(iv) Non-redeemable Preference Shares: Those preference shares, which can not be redeemed during the life time of the company, are known as non -redeemable preference shares. The amount of such shares is paid at the time of liquidation of the company.

(v) Participating Preference Shares: Those preference shares, which have right to participate in any surplus profit of the company after paying the equity shareholders, in addition to the fixed rate of their dividend, are called participating preference shares.

(vi) Non-participating Preference Shares: Preference shares, which have no right to participate on the surplus profit or in any surplus on liquidation of the company, are called non-participating preference shares.