Difference between Equity Share and Preference Share



Basis Of Differentiation

Equity Shares

Preference Shares

Definition

Also known as ordinary shares. Equity share is the foundation of the company as it raises fund. These cannot be converted to preference shares

Preference shares are the shares which promise the holder a preference over the equity shares. These can be converted to equity shares

Dividend

  • Equity shares do not have right to receive dividend
  • Under this the rate of dividend is fluctuating
  • Under preference shares, based on time, cumulative or non-cumulative are entitled for the dividend
  • Here, the rate of dividend is fixed

Voting rights

Voting rights under general meeting

Do not have any voting rights

Types

These are considered as ordinary shares and thus they do not have any types

These come in various types like:

  • Convertible and non-convertible
  • Cumulative and non cumulative
  • Non participatory, etc.

Liquidation

During liquidation, shareholders will have residual right over the asset even after the repayment to preference shares of the company

The shareholders will have first right after the repayment

Participation rights

They are primarily responsible for the management of the company

Do not have any participation rights in the company's management

 

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