Difference between Preference Share and Equity Share

Equity share and preference share capitals both are used by company to raise fund for business and in return company have to pay dividend to equity shareholders and preference shareholders. The preference share capital bears a fixed rate of dividend that company have to pay out of profit from business activity. Company pay the dividend to its equity shareholder after paying dividend to preference shareholders. An equity shareholder is also known as ordinary shareholders. There are some difference between preference share and equity share.

Point of difference	Preference share	Equity share
What is preference share capital and equity share capital?	A preference share bears the fixed rate of dividend and earn dividend before paying to equity shareholders.	Equity share does not receive the fixed rate of dividend as preference share and it gets dividend after paying to preference share and all outside creditors.
What is the other name of preference share capital and equity share capital?	It is also known as preferred shares.	An equity share is also known as ordinary share.
Which shareholder gets the voting rights in a company?	A preference shareholder has no voting rights in a company meeting.	An equity shareholder has voting rights in a company meeting. They can participate in company meeting. The shareholders select the board members who take actions in favour of shareholders interest.
What happen if company does not declare dividend in any year?	Company does not have sufficient profit or not able to declare dividend to its shareholders then the current year fixed rate of dividend is accumulated in next year dividend. So, the preference shareholder does not lose his dividend in any year.	If company does not have sufficient profit or not able to declare dividend to its shareholders then the current year dividend is not accumulated in next year dividend.
What is the rate of dividend preference shareholder and equity shareholder gets from company’s profit?	A preference shareholder gets fixed rate of dividend in comparison to equity shareholder.	An equity shareholder dividend rates gets fluctuated or it is not fixed like preference shareholder. They get the part of profit as dividend if all the payments to outsiders are made.
Is preference share or equity share redeemable or not?	A preference share is redeemable. It means the share mature in future period and company has to pay the principal amount to preference shareholder.	An equity share is irredeemable. It means there is no maturity period. The equity shares can be transfer from one person to other.
What will happen with preference shareholders and equity shareholders at the time of winding up of a company?	At the time of winding up of a company the preference shareholders get the payment by selling company’s assets in comparison to equity shareholder.	At the time of winding up of a company the equity shareholders get the payment after company paid to preference shareholders and all outsiders like creditors.
Which shares have ability to convert from one share to other preference share or equity share?	A preference share can easily convert into equity share.	An equity share cannot convert into preference share.