{"id":6822,"date":"2021-09-26T19:46:41","date_gmt":"2021-09-26T14:16:41","guid":{"rendered":"https:\/\/scholarsclasses.com\/blog\/?p=6822"},"modified":"2025-10-08T13:21:07","modified_gmt":"2025-10-08T07:51:07","slug":"meaning-of-preference-shares","status":"publish","type":"post","link":"https:\/\/scholarsclasses.com\/blog\/meaning-of-preference-shares\/","title":{"rendered":"Meaning of Preference Shares &#8211; Definition, Advantages, and Disadvantages"},"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-69d5b8844e27a\" 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-69d5b8844e27a\"  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\/meaning-of-preference-shares\/#Meaning_of_Preference_Shares\" >Meaning of Preference 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\/meaning-of-preference-shares\/#What_are_Preference_Shares\" >What are Preference Shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-preference-shares\/#Advantages_of_Preference_Shares\" >Advantages of Preference Shares<\/a><\/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\/meaning-of-preference-shares\/#Disadvantages_of_Preference_Shares\" >Disadvantages of Preference Shares<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading has-text-align-center\"><span class=\"ez-toc-section\" id=\"Meaning_of_Preference_Shares\"><\/span><strong>Meaning of Preference Shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large is-resized\"><img decoding=\"async\" width=\"1024\" height=\"576\" data-src=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Preference-Shares-1024x576.jpg\" alt=\"Meaning of Preference Shares\" class=\"wp-image-6830 lazyload\" style=\"--smush-placeholder-width: 1024px; --smush-placeholder-aspect-ratio: 1024\/576;width:719px;height:auto\" title=\"\" data-srcset=\"https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Preference-Shares-1024x576.jpg 1024w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Preference-Shares-300x169.jpg 300w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Preference-Shares-768x432.jpg 768w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Preference-Shares-1536x864.jpg 1536w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Preference-Shares-640x360.jpg 640w, https:\/\/scholarsclasses.com\/blog\/wp-content\/uploads\/2021\/09\/Meaning-of-Preference-Shares.jpg 1920w\" data-sizes=\"(max-width: 1024px) 100vw, 1024px\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" \/><figcaption class=\"wp-element-caption\">Meaning of Preference Shares<\/figcaption><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_Preference_Shares\"><\/span>What are Preference Shares?<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong>Preference Shares:<\/strong> As the name indicates, these shares have certain preferential rights distinct from those attached to equity shares.<br>The shares that carry the following preferential rights are termed as preference shares :<br><strong>a) A preferential right as to payment of dividend during the lifetime of company.<br>b) A preferential right as to the return of capital in the event of winding up of company.<\/strong><\/p>\n\n\n\n<p>The holder of preference share have a prior right to receive a fixed rate of dividend before any dividend is paid to equity shares. The rate of dividend is prescribed at the time of issue.<\/p>\n\n\n\n<p>Normally <a href=\"https:\/\/www.bloombergquint.com\/financial-terms\/what-is-preference-shares-definition-meaning-and-basics-of-preference-shares\" target=\"_blank\" rel=\"noreferrer noopener\">preference<\/a> shares do not carry any voting power. They have voting right only on matters which affect their interest, such as selling of undertaking or changing rights of preference shares, etc. or the get voting rights if dividend remains unpaid.<\/p>\n\n\n\n<p>The preference shareholders are co-owners of the company but not controllers. These shares are purchased by cautious investors who are interested in safety of investment and who want steady returns on investments.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/public-deposits-meaning\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/public-deposits-meaning\/\" target=\"_blank\" rel=\"noreferrer noopener\">Public Deposit <\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/gdr-meaning\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/gdr-meaning\/\" target=\"_blank\" rel=\"noreferrer noopener\">Global Depository Receipt (GDR)<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/features-of-shares\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/features-of-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\">Features of Shares<\/a><\/li>\n\n\n\n<li><a href=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-equity-shares\/\" data-type=\"URL\" data-id=\"https:\/\/scholarsclasses.com\/blog\/meaning-of-equity-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\">Meaning of Equity Shares<\/a><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Advantages_of_Preference_Shares\"><\/span>Advantages of Preference Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It is suitable for investors who want security and safety of returns on money invested as preference shares carry a fixed rate of dividends.<\/li>\n\n\n\n<li>Preference shareholders enjoy preferential right of repayment of capital in the event of liquidation of company.<\/li>\n\n\n\n<li>Preference shareholders get preference of dividend payment over equity shareholders.<\/li>\n\n\n\n<li>Issue of Preference shares does not dilute the control of equity shareholders over the management of the company as they do not have voting rights.<\/li>\n\n\n\n<li>Preference share capital does not create any charge on the assets of the company therefore the assets may be use to raise long term loans.<\/li>\n\n\n\n<li>It is beneficial for the equity shareholders as higher dividends may be declared for them in times of higher profits<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Disadvantages_of_Preference_Shares\"><\/span>Disadvantages of Preference Shares<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>It is not suitable for those investors who are ready to take risk and need higher returns.<\/li>\n\n\n\n<li>The issue of preference shares dilutes the control of equity shareholders over the assets of the company.<\/li>\n\n\n\n<li>The rate of dividend of preference shareholders is fixed, hence in times of higher profits, they do not get any benefit.<\/li>\n\n\n\n<li>Preference shareholders do not have voting rights, hence they do not have any say in the management of the company.<\/li>\n\n\n\n<li>Dividend on these shares is paid only when the company earns profit. Hence, there is no assured return for the investors<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>&#46;&#46;&#46;<\/p>\n","protected":false},"author":1,"featured_media":6830,"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":[10],"tags":[2846],"class_list":["post-6822","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-educational-blogs","tag-meaning-of-preference-shares"],"_links":{"self":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6822","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=6822"}],"version-history":[{"count":4,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6822\/revisions"}],"predecessor-version":[{"id":39459,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/posts\/6822\/revisions\/39459"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media\/6830"}],"wp:attachment":[{"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/media?parent=6822"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/categories?post=6822"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/scholarsclasses.com\/blog\/wp-json\/wp\/v2\/tags?post=6822"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}