A company can issue different types of preference shares. Preference shares are shares in the equity of a company that entitle the holder to a fixed dividend amount to be paid by the issuer. The types of preference shares are:
Cumulative preference shares: These are types of shares where shareholders are given the right to receive dividends for those years where dividends could not be paid due to insufficient profits.
Non-cumulative preference shares: These are types of shares where shareholders are not given the right to receive dividends for those years where dividends could not be paid due to insufficient profits.
Participating preference shares: With participating preference shares, the issuing company must pay an increased dividend to the owners of preference shares if there is a participation clause in the share agreement. This clause states that a certain portion of earnings (or of the dividends issued to the owners of common stock) will be distributed to the owners of preferences shares in the form of additional dividends.
Convertible preference shares: These are preference shares that can be converted into common stock if a shareholder wants to change its holding position. They are converted into a predetermined number of preference stocks.
Non-convertible preference shares: These are preference shares where the holder of a preference share has not been conferred the right to get their holding converted into equity share.
Redeemable preference shares: These are preference shares that can be repurchased or redeemed by the issuing company at a fixed rate and date.
In summary, a company can issue different types of preference shares, including cumulative, non-cumulative, participating, convertible, non-convertible, and redeemable preference shares.