Cumulative Preference Shares

Podcast Duration: 05:11

Hello friends, welcome to another podcast by Angel Broking!

As an investor, aap shares ke baare me jaante hi hain. As per section 43 of the Companies Act 2013, kisi bhi company ki share capital me do types ke share capital include hote hain.

Yeh hai equity shares and preference shares.

Equity shares woh hote hain jinhe company general public ke liye open up karti hai. Investors ko inn shares ko purchase karne se ek company ke kuch percent ownership rights milte hain.

Preference shares khareedne se investors ko ownership aur voting right nahin milti lekin dividends distribution aur capital payments ke time par preferential rights milte hain.

Ye preference shares kai tarah ke hote hain. Aaj hum jaanne waale hain ek type ke baare me called Cumulative Preference shares.

Basically cumulative preference shares me regular preference shares ke saare features hote hain. Jaise ki higher dividend payout, dividends ke payment me preference, aur liquidation ke time par payment ke liye equity shares se zyaada preference. Lekin unka ek added advantage bhi hai. Agar ek company kisi bhi reason ke lie dividends nahi de payi, cumulative preference shareholders are still entitled to dividends.

Jab companies profits nahi generate kar pati, tab woh apne investors ko ya toh bilkul dividends nahi de pati ya fir total profits ka ek reduced percentage deti hain as dividends. Aisi situation me equity shareholders ko kam ya zero dividends milte hain. Lekin cumulative preference shareholders ke paas right hota hai to get the dividends.

Waise ye concept thoda sa complicated toh hai. Issey theek se samajhne ke liye let us take an example.

XYZ company ne general public ko rupees 100 per share ke face value par cumulative preference shares issue kiye. Aur company ne apne shareholders ko share ki face value ki 10% value pe dividends promise kiye, every quarter.

Rohan aur Vijay dono ne XYZ company ki shares khareedi. Rohan ne cumulative preference shares li, aur Vijay ne equity shares choose kiya,

Dividends ke iss promise ko consider karke company ne regularly har quarter apne shareholders ko 10% dividends pay kiya for two years. Lekin next year, market ke slump ke wajah se XYZ company zyaada revenue generate nahin kar payi.

Aise situation me, company apne shareholders, including cumulative preference shareholders ko dividends pay nahi kar payi. Rohan aur Vijay, dono ko apne shares against dividends nahin mile. And this happened for three quarters in a row. Uss financial year ke last quarter me jaake company ka fir se revenue generate hua. Time for some due payments, right?

Cumulative preference shares ke holders ko regular dividends ka right hota hai, including past dividends jo ki miss ho gaya hai. Shares issue karne wali company ko pehle unpaid dividends clear karne hote hain. Iske baad hi company current quarter ke dividends pay kar sakti hai. For XYZ company the due was rupees 10 per share per quarter, for three quarters which totals to rupees 30 per share. Is payment due ke time, Rohan ko XYZ company ne due raha rupees 30 paper share dividend diya.

Unfulfilled dues and arrears ke payment ke baad company apne cumulative preference shareholders ko current quarter ki dividends deti hai. Rohan ko XYZ company ne per share rupees 10 dividend diya.

Iss sabke baad hi company apne equity shareholders ko dividends de paati hai. Jabki Rohan ko pehle apne dividends mil gaye, Vijay had to wait much longer for the company to repay its dues. On top of that, kyunki Vijay ke equity shares they, ussey teen quarters ki missed dividends bhi nahin mili.

Pretty interesting isn’t it?

Aap toh samajh hi gaye honge ki cumulative preference shares ke perks equity shares se zyaada hote hain. So let’s just go over the advantages of these cumulative preference shares.

Investors ko equity shareholders ke comparison dividends zyaada milti hain. Equity share ke compared cumulative preference shares ko dividend payout aur liquidation claims ke time preference di jaati hai. Agar ek company apne shareholders ko dividends pay nahi kar pati, cumulative preference shareholders ye dividend lose nahi karte. Jitni bhi dividend payouts unpaid hote hain, woh accumulate karti hain until the company is able to pay them. However, the dividend rate for cumulative preference shares is usually slightly lower than that of regular preference shares.

Ye toh investors ke ke liye advantages huye. What’s in it for companies?

Funding secure karne ke liye cumulative preference shares are great. Kyunki unke saath ownership aur voting rights nahi milti, cumulative shares company ko funding bhi provide karti hai aur control ya ownership bhi dilute nahi hoti.

To know more about shares, visit www.angelbroking.com.