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Q：
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What are preference shares?
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A：
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Preference shares are a class of shares that combine features of both equity and debt instruments. Holders of preference shares are generally given priority over ordinary shareholders in receiving dividends, which may be fixed or variable in rate. Malaysian companies may issue different categories of preference shares.
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Q：
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What are the types of preference shares in Malaysia?
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A：
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Cumulative and Non-Cumulative Preference Shares
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Redeemable and Irredeemable Preference Shares
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Convertible and Non-Convertible Preference Shares
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Participating and Non-Participating Preference Shares
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Q：
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What are Cumulative and Non-Cumulative Preference Shares?
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A：
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Cumulative preference shares allow unpaid dividends to accumulate if the company does not declare dividends in a particular financial year. In contrast, non-cumulative preference shares do not carry forward unpaid dividends. If dividends are not declared for a specific year, the shareholder loses the right to claim those unpaid dividends in the future.
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Q：
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What are Redeemable and Irredeemable Preference Shares?
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A：
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Redeemable preference shares give the issuing company the right to redeem the shares after a specified period and at a predetermined price stated in the terms of issue. In Malaysia, if the redemption is made out of capital, the company must satisfy the statutory solvency requirements before proceeding with the redemption. Irredeemable preference shares do not contain redemption provisions and generally remain in existence for as long as the company continues operating, unless otherwise dealt with under the company’s constitution.
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Q：
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What are Convertible and Non-convertible Preference Shares?
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A：
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Convertible preference shares provide shareholders with the option to convert their preference shares into ordinary shares according to a specified conversion period or method. Where a company’s constitution is silent on conversion rights, the preference shares are generally treated as non-convertible.
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Q：
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What are Participating and Non- Participating Preference Shares?
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A：
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Participating preference shares entitle shareholders not only to receive a fixed dividend but also to participate in additional profits of the company together with ordinary shareholders after certain conditions are fulfilled.
Non-participating preference shares only provide holders with the fixed preferential dividend agreed upon. They are not entitled to share in any excess profits or additional distributions beyond their fixed entitlement.
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FAQ
