Deferred shares are those that have fewer rights in some way than ordinary shares. The rights are often restricted to such an extent as (deliberately) to make the shares worthless, this happens in the course of a capital restructuring and such deferred shares are usually eventually cancelled.
The ways in which deferred shares have lesser rights can ordinary shares include:
- no voting rights (see non-voting shares),
- rank lower for repayment of capital in the event of insolvency,
- dividends may not be paid until a certain date, or until some triggering event has taken place,
- dividends may not be paid until after other classes of shares have been paid,
- the shares may not be tradeable until a certain date or event. This may happen, for example, when shares issued to employees as part of their remuneration may not be immediately traded in order to give them a long term interest in the company.
As can be seen from the above, deferred can mean the opposite of preferred, but the variations possible mean that it is not really an exact opposite.
PIBS are considered a type of deferred share because of their low ranking in insolvency (despite the non-existence of ordinary shares to compare them to), but are not often referred to as such.