Deferred Share

What is a 'Deferred Share'

A deferred share is a share that does not have any rights to the assets of a company undergoing bankruptcy until all common and preferred shareholders are paid.

2. A method of stock payment to directors and executives of a company through the deposit of shares into a locked account. The value of these shares fluctuate with the market and cannot be accessed by the beneficiary for the purpose of liquidation until they are no longer employees of the company.

3. A share generally issued to company founders that restricts their receipt of dividends until dividends have been distributed to all other classes of shareholders.

BREAKING DOWN 'Deferred Share'

1. Subordinate to all other classes of common and preferred stock, these shares are last in line when a company goes bankrupt and liquidates all assets.

2. These are different from phantom stocks because they don't allow for payment in cash. Also, rather than actual deposits of securities, companies sometimes maintain bookkeeping entries of cash equaling an offsetting security position. When the executive or director leaves the company, the cash is converted into stocks at market value.

3. No longer commonly used, these shares provided its holders with large dividend payouts only after all other classes of shareholders are paid. Holders of deferred shares had access to all the remaining profits after all obligations were met.

RELATED TERMS
  1. Preference Shares

    Company stock with dividends that are paid to shareholders before ...
  2. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  3. Class A Shares

    A classification of common stock that may be accompanied by more ...
  4. Accumulating Shares

    Common stock given to current shareholders of a company in place ...
  5. Common Shareholder

    An individual, business or institution that holds common shares ...
  6. Common Stock Equivalent

    Securities such as stock options, warrants, preferred bonds, ...
Related Articles
  1. Investing

    What are Preference Shares?

    Preference shares, also referred to as preferred shares, are equity shares that give the shareholders certain rights ahead of common shareholders. For instance, when the corporation declares ...
  2. Investing

    The Advantages of Preferred Dividends

    Preferred dividends are cash distributions a company pays on its preferred shares.
  3. Investing

    An Example of Dividends in Arrears

    Learn about the concept of dividends in arrears and which shares of stock guarantee payment of accrued dividends even if the company doesn't turn a profit.
  4. Investing

    Valuation Of A Preferred Stock

    Determining the value of a preferred stock is important for your portfolio. Learn how it's done.
  5. Markets

    Which Is Best: Cash Dividend Or Stock Dividend?

    Cash dividends are paid to shareholders when a company decides not to use the money for operations, but instead, transfer economic value to its shareholders.
  6. Investing

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  7. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  8. Trading

    What You Need To Know About Preferred Stock

    Curious about preferred shares? Here's what you should know about these bond-like instruments.
  9. Investing

    Who is a Shareholder?

    A shareholder is a person, company or other entity that owns at least one share of a company’s stock.
  10. Investing

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
RELATED FAQS
  1. What are the types of share capital?

    Understand the characteristics of common stock and preferred stock, the two ways by which companies obtain share capital ... Read Answer >>
  2. What are the advantages and disadvantages of preference shares?

    Learn about the advantages and disadvantages of preference shares to both investors and issuing companies, including the ... Read Answer >>
  3. What is the difference between Class A shares and other common shares of company's ...

    Discover how a company can break down its common stock into multiple classes and how these classes differ from one another ... Read Answer >>
  4. What are the different types of preference shares?

    Learn about the difference between the four types of preference shares – callable, cumulative, convertible and participatory ... Read Answer >>
  5. What are preferred shares?

    Understand what preferred shares are. Learn about both the benefits and the drawbacks of preferred shares, which effects ... Read Answer >>
  6. What is the difference between horizontal integration and vertical integration?

    Learn about the differences between bonds and preferred shares, including how payments are made on them and how corporate ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center