Preference shares are a class of shares that are issued to investors in a company, that enjoy certain benefits over ordinary shares:
- Preference shares usually come with a fixed dividend payout set as the percentage of the price of the shares issued
- The shares have priority over ordinary shares in cases of dividend payout
- During situations where claims to assets are made (for example during insolvency), preference shareholders have a priority claim over ordinary shares
On the other hand, preference shares typically do not have voting rights in the company, and is a means for shareholders to entice investors with regular payouts, but still ensuring they retain control of the company.