FAQs

Question

Do companies sell Preference shares also, where loss is not shared and all the burden comes on Equity share holders???

Answer

To begin with, preference shares are not a product which the company can sell. They are securities against which companies raise money for their operations and these shares generally have to be redeemed by the company after a specified period. However, you have rightly judged that the preference shares are not liable for losses of the company - as long as there is any equity capital still outstanding. In case, the losses exceed the total equity capital, then preference shares will also become liable for bearing the remaining losses of the company.




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