Introduction
Preference shares are a common financing tool used by Australian companies, particularly startups, growth businesses and venture-backed enterprises. They allow companies to raise capital while providing investors with enhanced economic rights and protections that are not typically available to holders of ordinary shares.
Preference share structures have become increasingly prevalent in venture capital and private equity transactions because they provide flexibility in allocating economic and governance rights between founders, investors and other stakeholders.
This article outlines the legal framework governing preference shares in Australia, the rights commonly attached to them, and why companies use multiple classes of preference shares as part of their capital-raising strategy.
