Preference Dividend

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 July 2011 Helo,

I have a question that whether it is compulsory to pay dividend to Non Cumulative preference shareholders in case there is profit in the company, if yes then give justification regarding such....

Guest

Guest (Expert)

11 July 2011
Shares being ‘Preference’ itself suggest that such shareholders shall Rank Prior in Payment of any Dividend.

Querist : Anonymous

Querist : Anonymous (Querist)

11 July 2011 but dear i want to know whether it is compulsory to pay dividend to non cumulative preference shares in case of profit in the company....

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Guest

Guest (Expert)

11 July 2011
No it is not compulsory to pay any dividend to Preference shareholders in case, there is Profit but company does not want to pay any dividend.

But if company wishes to pay dividend to Equity shareholders it can do so only after paying dividend to Preference shareholders.

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Querist : Anonymous

Querist : Anonymous (Querist)

11 July 2011 but dear i want to know whether it is compulsory to pay dividend to non cumulative preference shares in case of profit in the company....

Querist : Anonymous

Querist : Anonymous (Querist)

11 July 2011 But yar i need justification of such interpretation.....

Guest

Guest (Expert)

11 July 2011
Justification lies in the characteristics of the ‘Two Different Shares’.
Equity & Preference.

Situation 1:Do not pay any Dividend to any Shareholder:

Company is justified as it is not bound to pay any Dividend by any obligation to any shareholder, whether Equity or Preference.

Situation 2: If Company pays any Dividend, first pay to “Preference Shareholders”:

Equity shareholders are owners of the Company. They are the one who has entitled “Preference Shareholders as such”. Such shareholders therefore enjoys such Priority.