Quick Definition

Preference shares are a type of stock that provides shareholders with preferential rights to dividends and asset distribution over common stockholders, but typically do not carry voting rights.

Examples

• 1A company issues preference shares with a fixed dividend rate of 5%, ensuring holders receive dividends before common shareholders.
• 2During a company liquidation, preference shareholders are paid out from the company's assets before common shareholders, but after debt holders.
• 3A startup might issue preference shares to investors, offering them a safer investment compared to common shares, with fixed dividends and priority in asset distribution.

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