Preference shares, as the name suggests, are shares in a company that have certain preferred rights over other shares in the company. These preferences are commonly in relation to dividends and/or a return of capital so that preference shareholders have a right to a dividend and to a repayment of capital ahead of other shareholders.
You might want to issue preference shares as a means of raising investment in your company, for example where borrowing is not available or where the investor is willing to accept that it will only see a return on its loan/investment if the company has distributable profits (in exchange for a larger return naturally).
Often preference shareholders have no right to vote unless their dividend is in arrears or the matter being voted on affects their position on a winding up of the company.
The issue of preference shares is regulated by the Articles of Association of a company, company law (in particular the Companies Act 2006) and any Shareholders Agreement entered into by the relevant shareholders.
If you wish to issue preference shares we can assist you by:
- Advising on the options and alternatives available.
- Reviewing the company's existing Articles of Association, any Shareholders Agreement and any other documents that may impact on the issue of preference shares.
- Amending the company's Articles of Association.
- Drafting directors and shareholders resolutions to amend the Articles, approve the allotment of preference shares and to waive pre-emption rights.
- Preparing share certificates.
- Making all necessary filings at Companies House.
- Updating the company's registers as required.
We will provide you with a fixed quotation to prepare all of the necessary documentation.