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.

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.