4.4 Comparison between Equity Shares and Preference Shares

Question

Accepted Answer

PointEquity (ordinary)PreferenceDividendResidual — after all prioritiesPriority — the fixed-rate dividend firstWinding upLast in the surplusPriority over equity on capital returnVotingThe full vote (the default)Generally no vote (except where their rights are affected — the protective triggers)Return of capitalNo redemption (the permanent capital)May be redeemable (the company's buy-back on terms)Arbitration of riskThe owners of the venture's upside and downsideThe quasi-creditor's position — comfort firstTypes—Cumulative, non-cumulative; participating; convertible; redeemable

Point	Equity (ordinary)	Preference
Dividend	Residual — after all priorities	Priority — the fixed-rate dividend first
Winding up	Last in the surplus	Priority over equity on capital return
Voting	The full vote (the default)	Generally no vote (except where their rights are affected — the protective triggers)
Return of capital	No redemption (the permanent capital)	May be redeemable (the company's buy-back on terms)
Arbitration of risk	The owners of the venture's upside and downside	The quasi-creditor's position — comfort first
Types	—	Cumulative, non-cumulative; participating; convertible; redeemable

4.4 Comparison between Equity Shares and Preference Shares

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