Distinguish between 'equity shares' and 'preference shares'.

Basis Equity Shares Preference Shares Type of issue Only one type It can be cumulative and non-cumulative Voting Rights Available Generally no voting. Only on default in payment of dividend may get voting right. Right to dividend No preferential right to get dividend. It may or may not be declared. Company non liable to pay dividend. Right to receive dividend in preference to equity shares. Company is liable to pay dividend in case of cumulative preference shares. Rate of dividend Cannot be fixed Can be fixed Refund of capital Refundable only on liquidation of company, if any surplus left after meeting all liabilities. They are redeemable and capital is refunded on expiry of fixed term. Preference in refund of capital No preference Priority over equity.