Preference Shares
Definition
Shares that carry preferential rights over common shares with respect to dividends and proceeds in a liquidity event. Preference shares held by institutional investors typically carry a liquidation preference, an anti-dilution provision, and information rights. The preference share terms for each funding round must be reflected in the cap table and in the waterfall analysis.
Common Misapplication
The most common misapplication is treating all preference shares as equivalent without distinguishing between series, each of which may have different liquidation preference multiples, participation rights, and anti-dilution provisions. A company with preference shares from three funding rounds has three series of preference shares with potentially different terms, each of which must be reflected separately in the waterfall analysis.
FFI Standard Reference
This term is defined and applied in Book 3, Section 3.5: The Liquidation and Exit Mechanics Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Preference Shares. https://ffistandard.org/glossary/preference-shares/. 2026.