Preference Share Capital

Preference share capital is a type of equity funding which provides the investor with fixed returns. Preference share capital or preferred shares often mandate a fixed dividend to be provided every year for each of the preferred stock, thereby exhibiting a nature similar to that of a bank loan. After the elapse of time as agreed between the investor and company, preference shares are usually redeemed to provide the investor with a bulk payment at the end. Preference share capital can also be redeemed in trances to make the funding structure similar to that of a loan. Companies Act, 2013 mandates that all preference shares be redeemed within 20 years.



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