The types of preference shares are as follows :
- Participating and non-participating preference shares : Participating preference shares are those shares which provides the holder a right to participate in the surplus of the company after a certain rate of dividend has been paid to equity shareholders. Preference, shares that do not enjoy such right of participation provided to the holder in the profits of the company are known as non-participating preference shares.
- Cumulative and non-cumulative preference shares : The preference shares whose dividend, if not paid during a year, gets accumulated are known as cumulative preference shares, while the preference shares which do not enjoy such right are known as non-cumulative preference shares.
- Convertible and non-convertible preference shares : Convertible preference shares are those which can be converted into equity shares after a specified period of time while the preference shares which cannot be converted into equity shares are known as non-convertible preference shares.