There are numerous different types but they all boil down to a class of share that is paid ahead of the holders of ordinary shares. (or indeed "take preference" over ordingary shares)
A business may need a loan and as security they issue shares that have no voting rights but will pay a dividend regardless as to whether the company can afford to pay a dividend.
This dividend may not be paid immediately but the owners of the preference shares have the right to that dvidend in the same way as interest on a loan.
Preference shares seldom have voting rights (but can have).
They may be time limited, such as the shares will last for five years and are then redeemed.
They could be issued at a discount and settled at par.
There are all sorts of variations but it all boils down to that they are more akin to security on a loan and they take preference over other shares in any division of profit.
Also note that if a company goes into liquidation preference shares again take preference over other shares.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
