The notion of substance over form may result in certain types of preference shares being classified as debt not equity.

Question

Quizplus · Accepted Answer

The principle of substance over form means that the economic reality of a financial transaction should take precedence over its legal form. This means that if the substance of a preference share is more akin to debt than equity, it may be classified as debt for accounting and tax purposes, even if it is legally classified as equity. This could have significant implications for the issuing company and its investors, as debt and equity have different characteristics and implications for financial reporting and taxation.

The Notion of Substance Over Form May Result in Certain