REDEEMABLE PREFERENCE

     These are similar to other types of preference shares, but they are liable to be redeemed after a certain period, sometimes this liability is at the option of the company. The company can only redeem them out its profits or out of the proceeds of a fresh issue of shares made for the purpose of redemption. The issue of the redeemable preference shares was first allowed by section 46 of the companies Act of the year 1929.

                          PARTICIPATING PREFERENCE-

      These are shares that are similar in all respects but one to other preference shares. The difference  is that if a company has earned sufficiently  good profits in any one year to discharge all prior rights  to dividend , the participating preference  shareholders  will receive , in addition to the contracted rate of the dividend on their shares, an extra percentage  of dividend of the  stated rate. One very good method of allocating the bonus is as follows, firstly the contracted rate is allocated then an agreed rate is allocated to the ordinary shareholders and the balance of the profit is divided between the participating and ordinary shareholder in agreed proportions. In some companies, the preference shareholders are only just entitled to intervene in the affairs of the company if and when their own class of shares is affected.

                        ORDINARY SHARES-

      These shares carry no special rights and the dividends on them wax or wane according  to profits made by the company , In some years holders may receive  small or even  no dividends; in other years the dividends may  receive  small or even no dividends  in other  years the dividends  may  be large. It may happen that a company earns such large profits over a period of time that, in addition to rewarding the ordinary shareholders with cash dividend, it is able to issue bonus shares. Thus the holders of the ordinary shares may receive one bonus share free for, let’s say every five shares already held. After the bonus distribution, the shareholder’s holding will be increased by one fifth so that in the following years, if profits are maintained, his total dividend will be one –fifth greater than it was before.

                     DEFERRED SHARES-

     These shares are often taken by the promoter of the company for services rendered or by the vendors of an existing business, as full or part consideration for the transfer of their assets to the new company. They are therefore sometimes fondly called Founders or Management shares. Before deferred shareholders receive any dividend, a fixed rate of the dividend is paid to all the other classes of shareholders with prior rights. Therefore , out of the  year’s profit , the  stated  rate  will first  be paid to the preference shareholders , then  an agreed rate to the ordinary  shareholders  and any remaining profit  will be divided in agreed proportions  between the ordinary and deferred  shareholders. Ordinary and Deferred shares are sometimes referred to as equities. This is because their holders have the equity of the business; they are residuary legates who are entitled to all that is left when all prior claims have been met.

                      DEBENTURES-

       The easiest way for a company to raise additional capital is by issuing a or a series of debentures termed a debenture issue. A debenture is a document given by a company under its seal as evidence that the person named in the debenture has loaned money to the company and is a creditor of the company for the sum stated in it. It also states the rate of interest payable and the dates when the interest is to be paid. Debentures are of three kinds, Unsecured, secured and debentures that give a floating charge over the whole of the company’s property. An unsecured debenture is also called NAKED DEBENTURES, and it is just an ordinary unsecured loan and is not usually over specified assets of the company e.g. land and buildings and the company may not deal with the assets so charged without the consent of the debentures holders. This form of debenture usually includes also a floating charge over all the company’s moveable assets. Debenture that gives a floating charge over the company’s asset never has to prevent the company from dealing with charged assets in the ordinary course of trade. On default by the company in the payment of interest or on the happening of any other untoward

       Event specified in the debenture or the debenture deed, the lenders are free to take their legal remedies against the company. Every mortgage or charge to secure debentures must be filed at corporate affairs commission, in England; it is at the Somerset house, where it is open to public inspection.

        There are differences between debentures and shares, it is very necessary that the differences be noted though but briefly. A debenture   holder is a creditor for a loan, whereas a shareholder is not but a member of a company. Interest must be paid whether profit is made by the company or not, dividends are payable only out of profits and only declared by directors for the shareholders. In issue of default, the debenture holder may realize his security to enforce repayment of his loan with accrued interest prior to all other creditors. Whereas the shareholder has no remedy if a dividend is not forthcoming and his right to a return of his/her capital is postponed in favor of the creditors of the company. Debentures may be redeemable or irredeemable but the majority of industrial debentures are redeemable, where as shares are irredeemable but redeemable preference shares may be issued, under certain safeguards. Debentures may be issued at a discount, whereas shares cannot be issued at a discount unless in certain restricted circumstances.