Q.What is meant by a Preference Share?

Preference shares sit between equity and debt in this AP Intermediate Commerce chapter's classification of company finance.

A preference share is a share that carries two preferential rights over an equity share. First, it carries a right to receive dividend at a fixed rate before any dividend is paid to equity shareholders. Second, it carries a right to receive the return of its capital before equity shareholders in the event the company is wound up.

Preference shareholders normally do not enjoy voting rights, except in specified circumstances such as when their own dividend remains unpaid for a stipulated period, or on a resolution that directly affects their own rights. Preference shares may be cumulative or non-cumulative, participating or non-participating, and convertible or non-convertible, and under the Companies Act, …