Preference shareholders, also known as preferred shareholders, have specific rights that distinguish them from ordinary shareholders. Understanding these rights is crucial for anyone studying corporate finance or law. Let’s break down the key rights of preference shareholders:

1. Dividend Rights:

   Preference shareholders typically have the right to receive dividends before ordinary shareholders. These dividends are usually fixed and paid at a predetermined rate. If a company is unable to pay dividends in a given year, preference shareholders may have the right to accumulate unpaid dividends, which must be paid before any dividends can be distributed to ordinary shareholders.

2. Liquidation Preference:

   In the event of a company's liquidation, preference shareholders have the right to be paid back their investment before any assets are distributed to ordinary shareholders. This means they have a higher claim on the company’s assets than common shareholders.

3. Voting Rights:

   Generally, preference shareholders do not have voting rights in the company’s decisions, unlike ordinary shareholders. However, some classes of preference shares may grant limited voting rights under certain conditions, such as when dividends are in arrears.

4. Conversion Rights:

   Some preference shares come with the option to convert into ordinary shares at a predetermined rate. This can be beneficial if the company performs well and the value of ordinary shares increases significantly.

5. Redemption Rights:

   Preference shareholders may have the right to redeem their shares after a certain period. This means they can sell their shares back to the company at a specified price, providing an exit strategy for investors.

In summary, preference shareholders enjoy certain advantages over ordinary shareholders, particularly regarding dividends and asset claims during liquidation. However, they may sacrifice some control over the company due to limited voting rights. Understanding these rights is essential for anyone involved in corporate governance or investment decisions.