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Understanding the Differences between
Ordinary Shares & Preferential Shares 

Related topics: Corporate, Shareholder

Every players in the commercial field, whether you are the investor or initiator, should first know the differences of Ordinary Shares and Preferential Shares as allocation of different shares to different people with different roles can yield benefit to the business or disaster at its worst.

The common misconception that is still practiced until today i.e. each person shares is allocated in accordance to its fund size contribution. This would result in inefficiency of the business management because the shareholder with the largest voting rights may not be able to make the best decision required especially if they are not equipped with the relevant skills and experiences, or that they are just 'sleeping partner' (one who does not actively involve in the management of the company) who reap the most benefit, while the working partner who committed most of his time and non-monetary resources receive the least.

Hence by understanding the differences between ordinary shares and preferential shares, one is able to have a sustainable company built on careful structured shareholding. The differences between ordinary shares and preferential shares as follow-

By reading of the above, the simple conclusion that can be made is that ordinary shares shall only be given or hold by the ones who are actively initiating and driving the company while preferential shares are suitable to be issue to investors who has no interest to exert control of the company.