It is also called ordinary share, common share or common stock.
The persons who receive or purchase shares from limited company are called shareholders.
Equity shareholders do not have preferential rights in the payment of dividend and repayment of capital at the time of winding up.
It is also called preference stock.
These shares can be issued only after equity shares.
The persons who receive preference shares are called preference shareholders.
These shareholders have preference rights in dividend received.
Generally, dividend rates are pre fixed.
Common, equity or ordinary share |
Preference share |
|
Meaning |
Equity shares are the base capital of a limited company. |
A limited company can issue preference share only after issuing equity shares. |
Name of investors |
The person who purchases equity shares is called equity shareholder. |
The person who purchases preference shares is called preference shareholder |
Reward for investors |
Equity shareholders receive dividend. |
Preference shareholders receive preference dividend |
Fluctuation of reward |
Dividend rate may be different from year-to-year. |
Lack of information, preference dividend rate is fixed. |
Voting right
|
All the equity shareholders have voting right. |
Only specific preference shareholders have voting right. |
Redemption |
Equity shares can never be redeemed. |
Most of the preference shares are redeemable. |
Convertible
|
Equity shares can never be convertible. |
Some preference shares are convertible into equity shares. |
Secured
|
Equity shares are not secured by any security. |
Generally, preference shares are not secured by security. |
Payment of principal at liquidation |
Equity shareholders are paid only after debenture holders and preference shareholders. |
Preference shareholders are paid after debenture holders and before equity shareholders. |
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