Types of shares - cs security law notes
Posted on 25-10-2015
Shares can be voting or non-voting, meaning they either do or do not carry the right to vote on the board of directors and corporate policy. Whether this right exists often affects the value of the share. Voting and Non-Voting shares are also known as Class A and B shares.
The most common form of shares is ordinary (equity) shares. One can also buy preference shares, options and partly paid shares.
There are a number of different types of shares such as ordinary or preference shares which have different properties.
Preference shares are those shares in a company with rights in various ways superior to those of ordinary shares; for example, priority to a fixed dividend and priority over ordinary shares in the event of the company being wound up.
When a share is issued, the person applying for it must pay to the company, in cash or equivalent value, the amount of its nominal value together with any premium required by the company. Shares are fully paid when the whole amount has been received by the company.
Shares may also be issued on the basis that only part of their price is to be paid initially, with the remainder being required when called for by the company.
For more experienced investors, derivatives such as options and warrants provide further diversification. However, when the majority of investors invest in shares, they buy ordinary shares.