Forgangsfjárfestingar

Forgangsfjárfestingar, often translated as priority investments or preference investments, refers to a type of investment that receives preferential treatment within a company's capital structure. This preferential treatment typically pertains to the distribution of profits or assets in the event of liquidation.

Holders of forgangsfjárfestingar usually have a claim on the company's earnings that takes precedence over common stockholders. This often manifests as a fixed dividend payment that must be made before any dividends are distributed to common shareholders. In situations where a company is dissolved, forgangsfjárfestingar holders also generally have a higher claim on the company's assets than common stockholders, meaning they are repaid before common shareholders receive any proceeds from the sale of assets.

These investments can take various forms, most commonly in the issuance of preferred stock. Preferred stock combines characteristics of both debt and equity. Like debt, it offers a predetermined income stream, and like equity, it represents ownership in the company. However, unlike common stock, preferred stock typically does not carry voting rights. The specific terms and conditions of forgangsfjárfestingar are outlined in the issuing company's charter or a specific agreement. They are a tool for companies to raise capital while offering investors a degree of security and predictable returns compared to common equity.