6.3  Ordinary Shares and Preference Share

6.3.1 Ordinary Shares

Ordinary shares are shares which are not preferred with regard to dividend payments. Thus a holder only receives a dividend after fixed dividends have been paid to preference shareholders.

Ordinary shares are those most often issued by companies and traded on the stock market.

6.3.2 Preference Shares 

1. Specified Preference

Shares that carry certain specified preference, or first claim are called Preference shares. Usually these preference relate to the followings:

(1) Preference as to dividends

Shares with a dividend preference entitle their owners to receive dividends of a certain a amount.

    (2) Preference as to assets

Shares with a liquidating preference entitle the holders to receive, in the event the corporation liquidates, a certain amount before shares with secondary preference or no preference receive anything.

2.Classification of Preference Shares

Redeemable preference shares mean that the company will redeem (repay) the nominal value of those shares at a later date. Redeemable preference shares are treated like loans and are included as non-current liabilities in the statement of financial position.

Irredeemable preference shares are treated just like other shares. They form part of equity and their dividends are treated as appropriations of profit.