Preference shares are a type of share that gives shareholders preferential rights over equity shareholders in receiving dividends and repayment of capital in the event of company liquidation. Preference shares generally carry a fixed dividend rate, which is paid before any dividend is distributed to equity shareholders, subject to the availability of profits.
Preference shares may be classified as:
Cumulative, Non-cumulative, Redeemable, Irredeemable, Participating, Non-participating, Convertible, and Non-convertible preference shares, depending on their features and rights.