Distinguish between the following: 'Preference shares' and 'equity shares'.

Preference shares and Equity Shares Preference shares are entitled to a fixed rate of dividend, whereas, the rate of dividend on equity shares depends upon the recommendation of the Board of directors which in turn depends on the amount of profit available and the funds requirements of the company for future expansion etc. Dividend on the preference shares is paid in preference to the equity shares, In case of winding up, preference share holder get preference over equity shareholders with regard to the payment of capital. Dividend on preference share may be cumulative, whereas, the dividend on equity shares is paid only after the preference dividend has been paid and it is not cumulative. The voting rights of preference shareholders are restricted, whereas, A preference shareholder can vote only when his special rights as a preference shareholder are being varied, or on any resolution for the winding up of the company or for the repayment or reduction of its equity or preference share capital or their dividend has not been paid for a period of two years or more [section 47(2)]. An equity shareholder can vote on all matters affecting the company. No bonus shares/right shares are issued to preference shareholders, whereas, a company may issue rights shares or bonus shares to the company's existing equity shareholders. Redeemable preference shares may be redeemed by the company, whereas, equity shares cannot be redeemed except under a scheme involving reduction of capital or buy back of its own shares.