Differences between Equity Shares and Preference Share

Nov 30 -0001

Distinguish, differentiate, compare and explain what is the difference between Equity Shares and Preference Share. Comparison and Differences.

Equity shares

Equity shares are the ordinary shares of the company representing the part ownership of the shareholder in the company.

Preference shares are the shares that carry preferential rights on the matters of payment of dividend and repayment of capital.

S.No.	Basis of Difference	Equity Share	Preference Share
1	Meaning	Equity Shares are considered a part of the ownership of the company.	Preference shares are the shares that are given preference over equity shares.
2	Rate of Dividend	Dividend is depended upon profits.	They carry a fixed rate of dividend.
3	Payment of Dividend	Dividend is paid after the payment of dividend to shareholders.	Dividend is paid before the payment of dividend to shareholders.
4	Voting Rights	They carry voting rights.	They dont have any voting rights.
5	Repayment of Dividend	Repayment of equity capital in winding up is made only after the repayment of preferential shares.	In the event of winding up, preference shares are repaid before the repayment of equity capital.
6	Redemption	A company may buy-back its equity shares.	Preference shares are redeemed on due date.
7	Share Conversion	The equity shares are non convertible.	Preference shares can be converted into equity shares.
8	New Company Formation	A new company can be formed only with the equity shares.	A new company cannot be formed only with the preference shares.