Question
Which of the following is not a characteristic of
preference shares?Solution
Preference shares are a special category of share capital that grants shareholders certain priority rights over equity shareholders: β’ They are considered a type of equity but with preferential rights over dividend distribution and repayment of capital at winding up (Statement A β True). β’ Preference shareholders are generally entitled to a fixed dividend (Statement B β True). β’ They do not carry voting rights, except in special circumstances (Statement C β True). β’ Importantly, dividends on preference shares are paid before equity shareholders, not after (Statement D β False). β’ Certain types of preference shares may also come with a fixed maturity/redemption period (Statement E β True).
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