Equity shares and Preference shares
Q.4 (1) Equity shares and Preference shares
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| Points | Equity Shares | Preference Shares |
|---|---|---|
| Meaning | Shares which do not carry any preferential right; holders are the real owners. | Shares which carry preferential rights as to dividend and return of capital. |
| Dividend | Paid after preference dividend; rate fluctuates with profits. | Paid at a fixed rate before equity dividend. |
| Return of capital | Repaid last on winding up, after all others. | Repaid before equity shareholders on winding up. |
| Voting rights | Full voting rights on all matters. | Vote only on matters directly affecting their rights, or when dividend is in arrears for two years or more. |
| Control | Control and participate in management. | No control over management. |
| Risk | High risk, high possible return. | Low risk, fixed return. |
| Redemption | Not redeemable during the life of the company (except buy-back). | Must be redeemed within 20 years (redeemable preference shares). |
| Arrears of dividend | No right to arrears of dividend. | Cumulative preference shares get arrears of dividend. |
Doubtly AI
· 28 Oct 2026
AI-verified · Oct 2026
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