Dividendenvorrang

Dividendenvorrang is a term used in corporate finance and company law to describe a provision that gives certain shareholders priority over others in receiving dividends from distributable profits. This priority is typically realized through preferred shares (Vorzugsaktien) or other instruments that carry a fixed or minimum dividend.

How it works. In a financial year, profits are first allocated to the dividend-priority holders up to the agreed amount or rate. Only after these claims are met can any remaining profits be distributed to ordinary (common) shareholders. If the instrument is cumulative, any missed dividend payments accumulate and must be paid in the future before ordinary dividends are paid. If non-cumulative, missed dividends are not carried forward and do not have to be paid later.

Relation to other concepts. Dividendenvorrang is distinct from liquidation preference, which concerns the order of payments on dissolution or bankruptcy. It can be combined with other features, such as participation (where holders also share in additional profits after the fixed dividend) or limited voting rights. The exact terms are usually defined in the articles of association or in share issuance documents and are shaped by jurisdictional corporate law.

Implications and considerations. For issuers, dividend priority can reduce distributable profits available to ordinary equity and may affect capital costs and leverage. For investors, it provides a more stable income stream, often at the expense of potential upside and sometimes with limited or no voting rights. The regulatory and tax treatment of dividend-priority instruments varies by country and instrument type.