Rights of Preferred Stockholders

What this video covers

• Where preferred stockholders rank in the absolute priority rule: senior to common but junior to all debt including secured, unsecured, and subordinated debtholders
• Why preferred stockholders receive par value or liquidation value before common stockholders, and why common stockholders may receive nothing if assets are insufficient
• The critical distinction that preferred dividends must be declared by the board of directors; preference means first in line, not guaranteed payment
• Why cumulative preferred stock accumulates dividends in arrears but still requires a formal board declaration before any payout occurs
• Why preferred stockholders generally have no voting rights and no preemptive rights, and when contingent voting rights may activate after missed dividends
• How the exam tests preemptive rights as belonging exclusively to common stockholders, never to preferred stockholders
• The side-by-side comparison of preferred versus common across voting rights, preemptive rights, dividend priority, liquidation priority, dividend type, and growth participation