Preference shares, more commonly referred to as preferred stock, are shares of a company's stock with dividends that are paid out to shareholders before common stock dividends are issued. If the company enters bankruptcy, preferred stockholders are entitled to be paid from company assets before common stockholders.

Do employees ever get preferred stock?

When early-stage startups issue equity, there are generally two classes of people receiving shares: employees or founders and investors. Employees and founders typically receive common stock. Investors, on the other hand, generally receive preferred stock.

How do companies get preference shares?