Preferred dividend / Preferred share dividend

A share or part of a business share with dividend priority entitles it to dividends from the after-tax profit that can be distributed among the owners before and even more favorably than the other shares.

The share embodying ownership rights securities, which expresses the ownership share of the given investor a on a public limited company within. Although it is not a security, it is essentially the same business share its content is also the same ltd. case.

In addition to normal shares and shares of business, you are in investor contracts in share issuance additional rights and benefits can be stipulated for the owner of the given share. 

The preference shares for example the with common stocks on the other hand, they provide their owner with some kind of advantage or additional right. Within this, several classes are usually distinguished. May voting priority insurance share, which multiplies the vote assigned to your share of ownership, priority regarding the appointment of a senior official, pre-emption right you are insurance liquidation priority which is the company termination provides an advantage in payments.

The dividend preference share can be distributed among the shareholders from taxed profit guarantees payment before or at a more favorable rate than common stocks dividend. On the other hand, these shares have fewer or often no voting rights.

If in one year no dividend is paid for shares with dividend priority, then in the following year, dividends can only be paid in other share classes if the outstanding payments for shares with dividend priority have also been made in full.

The dividend priority right usually comes together with the liquidation priority right, i.e. the owners of the preferred shares are not only at the time of dividend payment, but also when the company is liquidated or sold (exit) also have an advantage over normal shareholders, including even the founders.

The startup although businesses typically do not operate in the form of a public limited company, the rights and liabilities of a specific share of ownership can be defined in accordance with the above in the case of a limited liability company. That's one early phase these distinctions are also available in the case of venture capital investment, such advantages for the investor or the founders can be described. The venture capitalists almost without exception, they always invest in such priority, preferred shares, business shares, and the priority conditions are already in place before the investment contract term sheet or the syndicate agreement tries to regulate.