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Advantages of Preference Shares

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Company’s Perspective:

(i) There is no legal obligation to pay dividend on preference shares. Preference dividend is payable only out of profits meant for distribution at the discretion of the management of the company.

(ii) Preference share enhances the creditworthiness of the company because preference share capital is included while computing net worth of the company.

(iii) Preference shares do not carry voting rights. So, there is no dilution of control.

(iv) Issue of preference shares does not involve any charge on the assets of the company.

(v) Participating preference shares can be converted into equity shares when needed

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