(English) Lesson 02: Advantages & Disadvantages of Preference Share to Issuers and Investors
Lesson 02 of Preference Share & Trust Investments Webinar Series. Training Duration : 1 Hour 29 MinutesWatch Promo
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Webinar Outline - Lesson #02 Advantages and Disadvantages of Preference Share to Issuers and Investors
Quiz: #02 Advantages and Disadvantages of Preference Share to Issuers and Investors
Advantages of Preference Shares for Issuers
Advantage #01: No Control Dilution
* Sample Constitution Clause on Voting Rights
Advantage #02: Predictability of Cost
Advantage #03: Flexibility of the Capital Structure
* Sample Constitution Clause on Redemption
Advantage #04: Less Financial Burden
Advantage #05: New Source of Capital
Disadvantages of Preference Shares for Issuers
Disadvantage #01: Higher Cost of Dividend
Disadvantage #02: Priority of Distribution over Ordinary Shareholders
Disadvantage #03: Potential Increase of Financial Burden
Disadvantage #04: Lack of Tax Deductibility
Table to Explain Difference in Tax Deductibility on Loan from Bank vs Preference Shares
Rewards of Preferential Shares to Investors
Rewards #01: Higher dividends
Rewards #02: Regular payouts
Rewards #03: Preferential rights to distribution
Rewards #04: Lower Investment Risk
Disadvantages/Risks to Invest in Preference Shares
Disadvantages/Risks #01: Dividend Payment not Assured
Disadvantages/Risks #02: Potential Default in Redemption
Disadvantages/Risks #03: Limited Voting Rights
Disadvantages/Risks #04: Irrevocable Convertible Preference Share
* Sample Constitution Clause on Conversion, Converting Preference Shares to Ordinary Shares. Not a choice for Subscribers
Disadvantages/Risks 05: Feature of Non Cumulative Preference Shares
Disadvantages/Risks 06: Absence of guarantee
Disadvantages/Risks 07: High Penalty on Early Redemption
* Sample Constitution Clause on Early Redemption by the Subscriber
Table of Illustration: Early Redemption Penalty for Bank Fixed Deposit vs Preference Shares
Answer to Quiz: #02
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