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Participating Preference Shares

Updated on March 8, 2023

Participating Preference shares are a type of ‘Preference’ or ‘Preferred’ shares with special rights to participate in surplus profits in the event of liquidation, after all the other shareholders have been paid. These shareholders will receive a fixed rate of dividend and a share in the company’s extra earnings.

Features of Participating Preference Shares

A Participating preference share agreement may have certain specific clauses or features like:
1 Whenever a company declares profit, a share of profits, apart from dividends, will be paid to such shareholders.
2 In the event of closure of business operations, participating preference shareholders will receive a part of the realised net sale proceeds.
3 Participating preference shareholders may have special rights with regard to decisions related to the sale of the business or of some of its assets.