Question

ABC ltd wants to issue huge amount of shares to raise its capital but the directors decided not to dilute the control to more people, which shares should they issue:

Options

• Preference shares

• Equity shares

• Both of these

• None of these

Answer 1

Preference shares

Explanation:

• Preference shares provide capital to the company without diluting control, as preference shareholders generally do not have voting rights in most company matters.
• Equity shares give voting rights and hence dilute control, as more people become part-owners of the company.

Therefore, if the directors of ABC Ltd. want to raise capital without diluting control, they should issue preference shares.