DEFINITION of 'Contingent Voting Power'

A provision granting voting rights to preferred shareholders when the company cannot uphold the obligations outlined in the preferred shareholder arrangement. Contingent voting powers offer the shareholders additional security for holding preferred instruments.

BREAKING DOWN 'Contingent Voting Power'

With preferred stock, the primary source of income is generated from dividends because capital appreciation is minimal. Contingent voting powers may come into effect when the firm fails to make the dividend, eliminating the revenue of the preferred group. Armed with the power to vote, preferred shareholders may seek to remedy the financial difficulties that are restricting dividends by voting in new directors.

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RELATED FAQS
  1. What can shareholders vote on?

    Understand the usual voting rights of common stock shareholders, along with the importance of shareholders exercising their ... Read Answer >>
  2. What is the difference between preference and ordinary shares?

    Preferred shareholders have a higher priority claim to the assets of a corporation in case of insolvency than common shareholders. Read Answer >>
  3. Why would a company issue preference shares instead of common shares?

    Learn about some reasons that corporations might issue preference shares, and why investors might value them more than common ... Read Answer >>
  4. What is the difference between preferred stock and common stock?

    Preferred stockholders have a greater claim to a company's assets and earnings than common stockholders, but may not have ... Read Answer >>
  5. Is preferred stock an equity or a fixed-income security?

    Some investors refer to preferred stock as "a stock that acts like a bond." Here's why. Read Answer >>
  6. Do Shareholders Get a Say in a Firm's Operation?

    Stock ownership often provides a vote on board membership and other issues put out for shareholder approval. Read Answer >>
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