Corporate
Querist :
Anonymous
(Querist) 14 September 2011
This query is : Resolved
can the preference shareholders waive off their right to cumulative dividend??
Raj Kumar Makkad
(Expert) 14 September 2011
Preferred stock is preferred because preferred shareholders have first claims to any dividends and company assets, if liquidation occurs, over the common stockholder. However, creditors still get paid before preferred shareholders. The dividend for the common stock may fluctuate from year to year, or even from quarter to quarter, but the preferred dividend is fixed. Preferred stockholders get their dividend at a fixed rate before any dividends are paid on common stock. However, dividends are not guaranteed even to preferred stockholders.
Unlike common stock, the par value of preferred stock is more significant to the stockholder because the dividend is expressed as a percentage of the par value, which doesn’t vary with the market price. If the stock has no par value, then the dividend will be stated as a fixed sum per share.
Preferred stockholders also have no voting rights unless the company defaults on the dividend for a specific number of quarters, or if the company wants to issue a new class of preferred stock equal to or better than the existing preferred stock.
prabhakar singh
(Expert) 14 September 2011
YES the preference shareholders CAN waive off their right to cumulative dividend.
Querist :
Anonymous
(Querist) 14 September 2011
as per which provision of the companies act
prabhakar singh
(Expert) 14 September 2011
which provision of the companies act bar them from doing so??????????????/
prabhakar singh
(Expert) 14 September 2011
It must be born in common minds that any profit right or interest right can be waived off as a matter of own sweet will of the claimant.
Cumulative Dividends are often waived if the Preferred Stock converts to Common Stock prior to an IPO but may be included in the aggregate value of Preferred Stock applied to the Conversion Ratio for other purposes. Dividends that are not cumulative are generally called "when, as and if declared dividends."
Shailesh Kr. Shah
(Expert) 15 September 2011
There is no provisions in the Companies Act,1956 about right to waive off dividend by preference share holders.
The company need to adhere following:
1.TO Pass a resolution to waive off dividend of Preference shareholder;
2.Get consent for the same from preference share holders.
