Preference shares offers a company an alternative form of financing. Preference shares are the shares of the company's stock with dividends that are paid out to shareholders before common (equity) shares.
Basically these are premium shares whose value is higher as compare to debt and equity. The minimum amount of investment required is Rs. 10,00,000 for the private investment and Rs. 10 for public issue.
The income is fixed, the preference share price may fluctuate with interest rate and inflation. In case of bankruptcy it is a higher priority claim to the assests of a company. Also preference shares are the mixture of a bond and security (debt and equity).
Preference shares can be purchased in 2 ways:-
1. Through primary market ( where there is direct interaction between the buyer and the company)
2. Through secondary market:-
Online trading
Offline trading
Payment of preference dividend:
The amount of dividend can be paid by the issuer either in cash or through cheque or by crediting the amount to the investor's bank account