Reasons: Meaning: Preference shares get priority over equity shares in two respects.
(A) Priority to get dividend. (B) Priority to get capital at winding.
(1) Holders of preference shares do not have normal voting rights like equity shares. However, they can vote on any such matter which is directly affects their interest as investors.
(2) It is ownership capital but less riskier due to guaranteed returns and payment of capital.
(3) It is temporary by nature, generally returned after a period of time. It is therefore safe capital.
(4) Preference shares earn a fixed rate of dividend.
(5) They have no participation in management or fight to attend meetings.
(6) They may vote by attending meetings especially called for them on a matter involving their interests if the need arises.
