Correct Answer:
C. Voting rights
Preference shares, also known as preferred stock, are a hybrid security that combines features of both debt and common equity. They offer certain advantages to investors but also come with specific limitations compared to common shares.
- Voting rights (C) is NOT a typical feature of preference shares. Unlike common shareholders, preference shareholders generally do not have voting rights in the company's general meetings or on corporate matters. This is a key distinction, as common shareholders typically exercise control through their voting power.
- Fixed dividend (A) is a common feature, as preference shares usually pay a predetermined, fixed dividend rate, providing stable income to investors.
- Cumulative dividend (B) is another frequent feature, meaning that if the company misses a dividend payment, it accumulates and must be paid to preference shareholders before any dividends can be distributed to common shareholders.
- Priority over equity (D) refers to the fact that preference shareholders have a higher claim than common shareholders on the company's assets in the event of liquidation and on dividend payments.
Thus, the absence of voting rights is a defining characteristic that differentiates preference shares from common equity.