A preferred share holder receives dividends on a priority basis, with the amount usually determined by the charter as a fixed sum, percentage of par value, or share of profit. In return, the holder loses voting rights at the general meeting.
This exchange of rights is not unconditional. If the dividend is not paid or partially paid, preferred shares become voting shares until payment is made. Additionally, on matters affecting the rights of their holders, they vote regardless of the current situation.
Economically, these securities occupy an intermediate position between stocks and bonds: payments are more predictable than ordinary shares but are not a company obligation like coupons.
When choosing between ordinary and preferred shares of the same issuer, the price difference, dividend amount and stability, and the charter's dividend determination procedure matter. Charter provisions here are more important than general rules: they determine how dividends are calculated and what happens if they are not paid.