Difference between Preference Shares and Equity Shares
|
Basis |
Preference Shares |
Equity Share |
|
1. Right to Dividend |
Dividend is paid on Preference Shares
before it is paid on Equity Shares. |
Dividend is paid on Equity Shares
after it is paid on Preference Shares. |
|
2. Rate of Dividend |
Rate of Dividend may be fixed. |
Rate of dividend is proposed by the
Board of Directors every year. |
|
3. Arrears of Dividend |
If Preference Shares are Cumulative
Preference share, arrear of dividend is paid before dividend is paid on
Equity Share |
Dividend is declared every year. In
case, dividend is not declared during the year, it is not accumulated to be
paid in the coming years. |
|
4. Convertibility |
Preference Shares may be converted to
Equity |
Equity Shares are not convertible. |
|
5. Redemption |
Preference Shares are redeemed on the
due date. |
A company may buy-back its Equity
Share |
|
6. Voting Rights |
Preference shareholders have voting
rights only in special circumstances. |
Equity Shareholders have voting rights
in all the circumstances. |
|
7. Refund of Capital |
On winding up, the Preference Share
Capital is repaid before the Equity Share Capital is paid. |
On winding up, Equity Share Capital is
repaid after the Preference Share
Capital is paid. |
|
8. Right to Participate in Management |
Preference shareholders do not have a
right to Participate in the management of the company |
Equity shareholders have a right to
participate in the management of the company. |
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