Glossary

Preference shares

Preference shares rank ahead of ordinary shares for dividends and, usually, for capital on a winding-up — a halfway house between equity and debt often used to attract outside investment.

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PriorityPaid before ordinary shares

Fixed-ishOften a set dividend rate

Definition

Preference shares are a class of share carrying preferential rights over ordinary shares — typically a fixed dividend paid before any ordinary dividend, and priority for the return of capital if the company is wound up.

In plain terms

They sit between a loan and normal ownership: like debt they often pay a set return, but like equity they're shares. Investors like the priority; founders like keeping control with ordinary shares.

Why it matters for your company

Preference shares are a common way to bring investment in without ceding voting control or taking on repayable debt. Weigh them against borrowing in equity vs debt finance.