Preference Shares vs Ordinary Shares: Dividend, Voting and Exit Rights Explained
Preference shares are shares that carry rights on top of those of ordinary shares, usually the right to be paid first: first for dividends, first for money when the business is sold or wound up, or both. Ordinary shares are the standard shares every company has. They carry a vote and an equal share of whatever is left once everyone ranking ahead of them has been paid.
When an investor asks for preference shares, they’re asking the company to create a new share class, and a share class is a set of rights written into the company’s articles of association, its rulebook. Two…
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