| Feature |
Common Equity Shares |
Preference Shares |
|---|---|---|
|
Definition |
Represents basic ownership in a company | Hybrid instrument with fixed returns and preferential rights |
|
Dividend |
Variable, based on profits; not guaranteed | Fixed dividend (as per terms); paid before equity shareholders |
|
Voting Rights |
✅ Yes – full voting rights in company matters | ❌ Usually no voting rights (except in special cases) |
|
Priority in Dividend |
Lower – paid after preference shares | Higher – paid before equity shareholders |
|
Priority in Liquidation |
Last to receive assets | Paid before equity holders, but after debt holders |
|
Risk Level |
Higher risk – market-sensitive and residual in nature | Lower risk than equity but riskier than debt |
|
Return Potential |
High – can earn from capital gains + dividends | Limited to fixed dividend – no capital appreciation |
|
Listing on Stock Exchange |
Yes – freely traded on stock exchanges | Rarely listed; less liquid |
|
Convertibility |
Not applicable | Some types are convertible to equity (Convertible Preference Shares) |
|
Redeemability |
Not redeemable unless company buys back | Can be redeemable or perpetual |
|
Common Holders |
Retail and institutional investors | Mostly issued to institutional or strategic investors |
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