There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A):  Preference Shareholders have the right to receive the dividend before it is paid to Equity Shareholders.
Reason (R):  The Companies Act, 2013 defines Preference Shares are shares that have preferential right to receive dividends and also repayment of capital, if the company is wound up before equity shareholders.

Both Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

According to Section 43 of The Companies Act, 2013, a preference share is one, which fulfils the following conditions :
(a) That it carries a preferential right to dividend to be paid either as a fixed amount payable to preference shareholders or an amount calculated by a fixed rate of the nominal value of each share before any dividend is paid to the equity shareholders.
(b) That with respect to capital it carries or will carry, on the winding up of the company, the preferential right to the repayment of capital before anything is paid to equity shareholders.