CMA Final · Corporate and Economic Laws · Dividends
Under Section 43, a class of share capital carries a fixed-rate preferential dividend and preferential repayment on winding up, and also participates in surplus profits with equity shares. How is it classified?
It is preference share capital. Under Section 43, capital with a fixed-rate preferential dividend and preferential repayment remains preference capital even if it also participates in dividends or surplus with capital that lacks the preferential right.
- AEquity share capital with differential rights
- BPreference share capitalCorrect
- CEquity share capital with voting rights
- DA separate class outside both kinds
Explanation
Section 43 explanation (iii) says capital is deemed preference capital even if, besides the preferential rights, it participates fully or to a limited extent with non-preferential capital in dividends or surplus. Hence participation does not turn it into equity.
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