Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

preference Shareholders rights

meenu (cs) (416 Points)

11 September 2009

If the Company has not declared dividend what is the rights, options does the Preference Shareholders have?

Reply
Follow
Share

16 Replies

Hiren Doshi (Chartered Accountant) (38 Points)
Replied 11 September 2009

The Preference Shareholdres enjoy preferential right in the payment of Dividend during the lifetime of the company.

Their claim to the dividend is prior to the claim of Equity shareholdres or any other class of share holders.

The dividend rate is fixed whether the company makes profit or no and if the Co. skips the Preference Dividends for 3 years then it has to grant voting rights to preference shareholdres for the matters affevting them.

Upgrade to CAclubindia Pro. Subscribe Now!

meenu (cs) (416 Points)
Replied 12 September 2009

Dear Hiren,

Kindly quote the Section Pls.and elaborate what if the Company has not declared the dividend and if declared but we hvn't received the same.What is the course of action in both cases?

Its Urgent Pls.

Meenu

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 12 September 2009

Go through Section 87 of the companies act, 1956.

Regards

meenu (cs) (416 Points)
Replied 12 September 2009

Gud Morning Garg Sir,

Sir my query is what if the company has coverted the pref shares into equity Shares? What is the pref. shareholders rights for dividend then?For eg if conversion is done in 2003 and we hold the shares from 2001 then what if we hvn't receive the dividend for 2001-2003? can we as a pref. shareholders do anything?

Pls. expedite.

Regards,

Meenu

meenu (cs) (416 Points)
Replied 12 September 2009

and what if that before the completion of 3 years the co. has given the notice for conversion of pref. shares into equity.Then what rt. pref. shareholders have?

Upgrade to CAclubindia Pro. Subscribe Now!

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 12 September 2009

you can claim pref div for the year 2001-2003 as a pref shareholder at any time in case of cumulative pref shares.

After conversion in to eq share pref shareholder lost their pref right of div.

meenu (cs) (416 Points)
Replied 12 September 2009

We have taken the shares of Pvt. ltd. company now whether section 87 is applicalbe to us?

Secondly,The shares are converted into equity in 2003, now whether in 2009 we can claim dividend?

If the Co. has not at all declared dividend then also whether pref. sharesholders can be entitled for dividend?

Kindly clarify sir.

Meenu

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 12 September 2009

Section 87 is applicable to every company.

Yes you can claim dividend if share are cumulative pref shares.

Yes as per the rate of pref div they are entitled of dividend. (for example 6% pref shareholders)

meenu (cs) (416 Points)
Replied 12 September 2009

But in Ramiya it is metioned that Section 85 to 90 do not apply to pvt co. unless it is subsidiary of a public company.

Secondly, if the company has not opted the conversion of pref. shares into equity then what is the status? co'z it is optionally cumaulative pref. shares. Now whether the accumulated dividend will be received by the Company?

It is also stated in the Ramiya that" pref. shareholders will entitled to dividend only if Company declared it and in our case the company has not declared the same.

where the 6% rate is specified?

Kindly quote the specified section for my reference pls.

Regards,

meenu

meenu (cs) (416 Points)
Replied 12 September 2009

Kindly reply if the company has not declared the dividend can the pref. shareholders claim the same even then?

Upgrade to CAclubindia Pro. Subscribe Now!

Max Payne (employed) (2574 Points)
Replied 12 September 2009

If it is cumulative preference share then the arrears are as good as dividend declared.

meenu (cs) (416 Points)
Replied 12 September 2009

Yes, indeed it is optional cumulative pref. shares. but what if the co. has not declared dividend? can then also claim can be made

meenu (cs) (416 Points)
Replied 12 September 2009

the voting power on preference shares springs up involuntarily, once the arrears on dividend payment cross the stipulated timelines.

comment

meenu (cs) (416 Points)
Replied 12 September 2009

can the pref. shareholders claim for voting rights as the diviend is unpaid for more than 2 years although the company has not declred the dividend atall.