Cumulative preference shares meaning

shares carrying a fixed preference dividend that rolls up if it is not paid in a given year. If there are insufficient distributable profits, or no dividend is declared, the unpaid amount accrues as arrears and is payable, in priority to dividends on ordinary shares, when and to the extent a valid dividend is subsequently declared out of available profits. In UK and Irish company practice, preference dividends are generally presumed to be cumulative unless the terms of issue, the company’s articles of association or a shareholder agreement clearly provide that they are non‑cumulative. “Cumulative preference share” is not a statutory term; its effect derives from the articles/terms and supporting case law and market usage. There is no absolute right to payment until a dividend is duly declared in accordance with company law and the company’s constitution, and arrears do not bear interest unless expressly provided. Usage and legal effect are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland, subject to each jurisdiction’s rules on lawful distributions and solvency (for example, the distributable profits requirements under the Companies Act 2006 (UK) and the Companies Act 2014 (Ireland)).