Deferred Share

AAA

DEFINITION of 'Deferred Share'

1. 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.

INVESTOPEDIA EXPLAINS '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. Preferred Stock

    A class of ownership in a corporation that has a higher claim ...
  2. Phantom Stock Plan

    An employee benefit plan that gives selected employees (senior ...
  3. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
  4. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  5. Beneficiary

    Anybody who gains an advantage and/or profits from something. ...
  6. Liquidation

    1. When a business or firm is terminated or bankrupt, its assets ...
RELATED FAQS
  1. What is the difference between preferred stock and common stock?

    Preferred and common stocks are different in two key aspects. First, preferred stockholders have a greater claim to a company's ...
Related Articles
  1. Options & Futures

    The Two Sides Of Dual-Class Shares

    Find out how dual-class shares can affect a company's performance.
  2. Options & Futures

    A Guide To CEO Compensation

    Make sure you assess whether a CEO has a stake in doing a good job for you, the shareholder.
  3. Investing Basics

    Knowing Your Rights As A Shareholder

    We delve into common stock owners' privileges and how to be vigilant in monitoring a company.
  4. Stock Analysis

    What’s The Best Airline Stock In the Industry?

    With many airlines forced to seek bankruptcy protection, Southwest Airlines stands out as having consistently remained profitable throughout its history.
  5. Economics

    Afraid Of A New Financial Crisis?

    It may be time for the U.S. to adopt a model for financial companies that better deters risky financial behavior.
  6. Investing

    What's a Sunk Cost?

    A sunk cost was incurred in the past, is independent of future events and cannot be recouped. Economists teach that sunk costs should not be considered when making a financial decision. Rather, ...
  7. Investing

    What's a Divestiture?

    Divestiture is when a company, government or other organization sells, shuts down or otherwise eliminates a division or operating unit. Divestitures happen for many reasons. Management may decide ...
  8. Fundamental Analysis

    Capital Budgeting

    Capital budgeting is a planning process used by companies to evaluate which large projects to invest in, and how to finance them. It is sometimes called “investment appraisal.”
  9. Investing Basics

    What is the Stock Market?

    A stock market is where shares in corporations are issued and traded. Stock markets are key components of a free market economy.
  10. Investing

    Commercial Paper

    Commercial paper is a short-term debt security issued by financial companies and large corporations. The corporation promises the buyer a return, or profit, for making the loan. The return is ...

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center