what is preference share? classify it and explain its each classification

1. The Section 85 (1 ) of the Companies Act, 1956 defines Preferences shares to be featured by the following rights.

1. 1. Preference Shares entitle its holder the right to receive dividend at a fixed rate or of a fixed amount.
2. 2. Preference Shares entitle its holder the preferential right to receive repayment of capital invested by them before their equity counterparts at the time of winding up of the company.

Types of Preference Shares:

1. Cumulative Preference Shares: Right to receive arrears of dividend

2. Non-Cumulative Preference Shares: No right to receive arrears of dividend.

3. Participating Preference Shares: Right to participate in surplus profit.

4. Non-Participating Preference Shares: No right to participate in surplus profit.

5. Redeemable Preference Shares: Amount is repaid after the expiry of term for which they are issued.

6. Irredeemable Preference Shares: Not repaid during company's lifetime.

7. Convertible Preference Shares: Right to convert their shares into equity shares.

8. Non-Convertible Preference Shares: No right to convert their shares into equity shares.