|
S.No. |
Basis |
Preference Shares |
Equity Shares |
| 1. |
Rights to dividend |
Dividend is paid on preference share 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 is fixed. |
Rate of dividend is decided by the board of directors and approved by the shareholders. |
| 3. |
Arrears of dividend |
If preference shares are cumulative preference shares arrears dividend is paid before dividend is paid on equity shares. |
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 shares if the terms of issue so provide. |
Equity shares are not convertible. |
| 5. |
Redemption |
Preference share may be redeemed (refunded) |
A company may buy back its equity shares. |
| 6. |
Voting rights |
Preference shareholders have voting rights only in special circumstances. |
Equity shareholders have voting rights in all circumstances. |
| 7. |
Refund of capital |
On winding up, the preference share capital is repaid before the equity share capital is paid. |
On winding up, the equity share capital is repaid after the preference share capital is paid. |
| 8. |
Income Security |
Income are fixed and secured. |
Income are unsecured and not fixed. |
| 9. |
Ownership |
Preference shareholders are not real owner of company. |
Equity shareholder are assumed real owner. |
| 10. |
Compulsory of Issue |
Preference share’s are not compulsory to issue. |
Equity share’s are compulsory for issue to a company. |
| 11. |
Risk |
On these share’s risk is low. |
On these share’s risk is high from preference shares. |
| 12. |
Right to Act in Management |
No right. |
Elected shareholders right to Act in management. |
