Common Shares and preference shares

What are common shares? What are preference shares? 

Common shares typically refer to the “standard” class of shares that are issued; these include the following rights:

  • Voting - give the holder the right to vote
  • Participating - give the holder the right to receive dividends subject to the rights of other classes of shares
  • Right to receive assets - give the holder the right to receive their share of the assets on dissolution or liquidation 

Preferred shares, on the other hand, are typically issued in a separate class of shares where the corporation wishes to provide a “preference” to the holder. Preferred shares often have the following properties:

  • Non-voting 
  • Preferred fixed dividend – a preferred holder may be entitled to receive a “fixed return” on their initial investment in preference to any issuance of dividends to common shareholders
  • Preference over asset liquidation – a preferred holder may be entitled to receive its share of the assets in preference to common shareholders
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