A capital security that does not have maturity date and the distribution payments (coupon, dividends) can be deferred at the discretion of the issuer. In other words, perpetual capital securities are assumed to continue without a set redemption date, and hence are classified as equity because they are not redeemable (option to redeem at the discretion of the issuer) and distributions (coupon payments) are also left for discretion of the issuer.

These securities are presented as non-controlling interests in the consolidated financial statements and any coupon payments on the securities are charged directly to equity.

For example, a company may issue capital securities that are perpetual and non-callable in the first 5 years. Securities holders can receive distributions (coupon payments) at a fixed rate of 4.25% per annum in the first 5 years, which become variable or floating thereafter and with fixed step up margins at year 10 and at year 20, payable semi-annually in arrears, cumulative and compounding.

Coupon payments can be deferred at the discretion of the issuer (unless dividends are declared within a set period of time prior to the scheduled distribution date (dividend pusher) or other circumstances arise including distribution, payment or repurchase of junior or parity obligations). If the issuer decides to defer coupon payments to the holders, dividend stopper clause may come into application.

For tax purposes, perpetual capital securities may be considered debt securities and hence the distributions (including arrears of distributions and any additional distribution amounts) payable on the securities will be perceived as interest payable on underlying debt and can enjoy the tax concessions and exemptions available for qualifying debt securities (QDSs).

Any redemption of the these securities by the issuer, under certain circumstances, will be subject to the issuer obtaining the prior approval of relevant regulatory authorities (e.g., central banks).