Question

Justify the following statement.

Preference shares do not carry any voting rights.

Justify the following statement.

Preference shares do not carry normal voting rights.

Answer 1

1. Preference Shares are those shares which enjoy certain privileges and preferential rights over equity shares. The person holding preference share is known as ‘Preference Shareholder’.
2. Preference shareholders do not have normal voting rights like equity shares.
3. However, they can vote on any such matter which directly affects their interest as investors.
4. Thus, it is rightly justified that, preference shares do not carry any voting right.

Answer 2

1. Preference shares are shares that receive priority over equity shares in terms of dividend payment and return of capital. They are entitled to a fixed rate of dividend.
2. Owing to these preferential benefits, preference shareholders face comparatively lower risk than equity shareholders. Hence, they generally do not take part in the company’s general body meetings.
3. Unlike equity shareholders, they do not possess regular voting rights. Their voting rights are restricted to matters that directly concern or affect their interests.
4. In case their rights are affected, or if dividends remain unpaid for two consecutive years, they can require the company to call a separate meeting of preference shareholders and pass a resolution in that meeting.