Preference shares are a means by which a company can raise capital without increasing its debt or diluting the voting rights of existing shareholders.
Preference shares carry a fixed dividend but, unlike debt holders, preference share holders cannot take legal action against a company that fails to pay the expected dividend. If no dividend is paid to preference shareholders, however, company law says that no dividend may be paid to holders of any other shares either. Also, if no dividend is paid, preference shareholders acquire normal voting rights.
Preference shareholders are always first in the queue for dividend payments and, should a company declare bankruptcy, preference shareholders have priority over common stockholders for any asset distribution.