Which of the following normally participates in surplus capital?

Ordinary shares typically participate in surplus capital, which occurs within the context of a company’s capital structure and the distribution of profits during liquidation or in the event of surplus funds.

Ordinary shareholders have residual rights in the company, meaning they receive dividends only after all other obligations, such as debts and preference dividends, have been satisfied. In the case of a surplus, ordinary shareholders are the last to receive distributions, but they do participate in the distribution of remaining assets beyond the fixed obligations of the company.

This stands in contrast to preference shares and debentures, which generally have fixed rights to dividends or interest and may not participate in surplus capital in the same ways as ordinary shares. Preference shareholders have priority over ordinary shareholders regarding dividends and in the distribution of assets upon winding up, while debentures secured by fixed or floating charges have a claim over specific assets and ranks above equity holders.

Thus, ordinary shares are key participants in surplus capital due to their residual claim status after all creditor claims and obligations have been met.