{"id":4430,"date":"2021-08-10T18:41:58","date_gmt":"2021-08-10T13:11:58","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=4430"},"modified":"2025-10-07T19:00:05","modified_gmt":"2025-10-07T13:30:05","slug":"difference-between-preference-shares-and-equity-shares","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/","title":{"rendered":"Difference Between Preference Shares and Equity Shares (Companies Act 2013)"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69ef095aaf5e4\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69ef095aaf5e4\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/#Difference_Between_Preference_Shares_and_Equity_Shares\" >Difference Between Preference Shares and Equity Shares<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/#Equity_Share\" >Equity Share<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/#Meaning_of_Equity_Shares\" >Meaning of Equity Shares:<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/#Preference_Shares\" >Preference Shares<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/#Meaning_of_Preference_Shares\" >Meaning of Preference Shares:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/#Difference_between_Preference_Shares_and_Equity_Shares\" >Difference between Preference Shares and Equity Shares<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"Difference_Between_Preference_Shares_and_Equity_Shares\"><\/span>Difference Between Preference Shares and Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading has-text-align-left\"><span class=\"ez-toc-section\" id=\"Equity_Share\"><\/span>Equity Share<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Equity_Shares\"><\/span>Meaning of Equity Shares:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>According to the Indian Companies Act 2013, &#8221; an equity share is a share which is not a preference share&#8221;. An equity share does not carry any preferential right. Equity shares are entitled to dividends and repayment of capital after the claims of preference shares are satisfied.<\/p>\n\n\n\n<p>Equity shareholders control the affairs of the company and have the right to all the profits after the<br>preference dividend has been paid.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"512\" data-src=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-between-Preference-Shares-and-Equity-Share-1024x512.png\" alt=\"Difference between Preference Shares and Equity Share\" class=\"wp-image-4436 lazyload\" title=\"\" data-srcset=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-between-Preference-Shares-and-Equity-Share-1024x512.png 1024w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-between-Preference-Shares-and-Equity-Share-300x150.png 300w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-between-Preference-Shares-and-Equity-Share-768x384.png 768w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/08\/Difference-between-Preference-Shares-and-Equity-Share.png 1200w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/512;\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading has-text-align-center has-vivid-green-cyan-background-color has-background\"><span class=\"ez-toc-section\" id=\"Preference_Shares\"><\/span>Preference Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Meaning_of_Preference_Shares\"><\/span>Meaning of Preference Shares:<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>A share that carries the following two preferential rights is called a \u2018<a href=\"https:\/\/www.bajajfinserv.in\/differences-between-equity-shares-and-preference-shares\" data-type=\"link\" data-id=\"https:\/\/www.bajajfinserv.in\/differences-between-equity-shares-and-preference-shares\" target=\"_blank\" rel=\"noopener\">Preference Share<\/a>\u2019:<br>a) Preference shares have a right to receive dividends at a fixed rate before any dividend is given to equity shares.<br>b) Preference shares have a right to get their capital returned before the capital of equity shareholders is returned. in case the company is going to wind up.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/difference-between-fixed-capital-and-working-capital\/\" target=\"_blank\" rel=\"noreferrer noopener\">Difference Between Fixed Capital and Working Capital<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-owned-capital-and-borrowed-capital\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/difference-between-owned-capital-and-borrowed-capital\/\" target=\"_blank\" rel=\"noreferrer noopener\">Difference Between Owned Capital and Borrowed Capital<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-debenture-and-share\/\" target=\"_blank\" rel=\"noreferrer noopener\">Difference Between Debenture and Share<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/difference-between-preference-shares-and-equity-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\">Difference Between Preference Shares and Equity Shares<\/a><\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"Difference_between_Preference_Shares_and_Equity_Shares\"><\/span>Difference between Preference Shares and Equity Shares<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Points<\/strong><\/td><td><strong><strong>Equity shares<\/strong><\/strong><\/td><td><strong><strong>Preference shares<\/strong><\/strong><\/td><\/tr><tr><td>1) Meaning<\/td><td>Shares that are not preference<br>shares are called equity shares<br>i.e. these shares do not have<br>preferential right for payment of<br>dividend and repayment of capital.<\/td><td>Preferences shares are Shares that carry preferential rights as to payment of :<br>a) Dividend and<br>b) Repayment of capital.<\/td><\/tr><tr><td>2) Rate of Dividend<\/td><td>Equity shares are given dividend<br>at a fluctuating rate depending upon the profits of the company.<\/td><td>Preference shareholders get<br>dividend at a fixed rate.<\/td><\/tr><tr><td>3) Voting Right<\/td><td>Equity shareholders enjoy normal<br>voting rights. They participate in<br>the management of their company.<\/td><td>Preference shareholders do not<br>enjoy normal voting right. They<br>can vote only on matters affecting<br>their interest.<\/td><\/tr><tr><td>4) Return of Capital<\/td><td>Equity capital can not be returned<br>during the lifetime of the company.<br>(except in case of buyback)<\/td><td>A company can issue redeemable<br>preference shares, which can be<br>repaid during the lifetime of the<br>company.<\/td><\/tr><tr><td>5) Nature of capital<\/td><td>Equity capital is known as &#8216;Risk<br>Capital.&#8217;<\/td><td>Preference capital is \u2018Safe Capital\u2019<br>with the stable return.<\/td><\/tr><tr><td>6) Nature of investor<\/td><td>The investors who are ready to<br>take risk invest in equity shares.<\/td><td>The investors who are cautious<br>about the safety of their investment,<br>invest in preference shares.<\/td><\/tr><tr><td>7) Face value<\/td><td>The face value of equity shares<br>is generally Rs 1\/- or Rs 10\/- it is<br>relatively low.<\/td><td>The face value of preference shares is relatively higher i.e.<br>100\/- and so on.<\/td><\/tr><tr><td>8) Right and bonus issue<\/td><td>Equity shareholder is entitled to<br>get bonus and right issue.<\/td><td>Preference shareholders are not<br>eligible for bonus and right issue.<\/td><\/tr><\/tbody><\/table><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":4436,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[2073],"class_list":["post-4430","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-misc","tag-difference-between-preference-shares-and-equity-shares"],"_links":{"self":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/4430","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/comments?post=4430"}],"version-history":[{"count":6,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/4430\/revisions"}],"predecessor-version":[{"id":39253,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/4430\/revisions\/39253"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media\/4436"}],"wp:attachment":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media?parent=4430"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/categories?post=4430"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/tags?post=4430"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}