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8 MAR 2021
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8:43 AM

用优先股筹资 Raising Capital with Preference Shares

用优先股筹资 Raising Capital with Preference Shares


Preference shares pay out promised dividends (say 10% per annum) when the companies are profitable. In comparison, ordinary shares emphasize more on growth in the company’s future value which lead to capital appreciation.





Preference shares fall under four categories: cumulative, non-cumulative, redeemable, irredeemable or convertibles.


Normally, preferences shareholders do not have the right to participate in voting, management control or company operation unless the investment package is bundled with voting rights and convertible nature.


If company makes higher profits than expected, ordinary shareholders will benefit from the excess profits as dividend upon settling their promised return to preference shareholders.


In the event of liquidation, preference shareholders will have first right before ordinary shareholders to claim the assets after settling the liquidator’s fees and creditors.


Unlike ordinary shares, preference share is not compulsory in all private company. It’s an optional scheme that facilitate business owner to invite investor into their business. Allotment of preference share involves higher cost in altering the constitution and preparing relevant legal agreements. Therefore, it will only be more economically efficient if you are raising a substantial amount of funds.

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