Difference between Preference Shares and Equity Shares



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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