What are the Different Share Types? What are the types of shares available on the market right now? Shares due to the method of transferring ownership title to the property rights to another owner are divided into:1. Bearer shares where the transfer of ownership title to the share in the company is held by handing shares. This way of transfer of ownership makes this particular type of shares the easiest in trading. Transactions of sale and purchase of these stocks are the least complicated and laborious. This is a big advantage.
2. Registered shares where the transfer of ownership takes place through the application of the new owner to the board of the company. He shall be entered in the so-called share register and receive the shares issued to him. This mode of changing the owner makes trading in shares difficult to a large extent. The transaction is simpler, but its execution takes longer. This feature interferes with the rate of flow of capital in the financial markets. Less complicated procedure of transferring the ownership of bearer shares decides on their functionality in terms of variables markets.
This is precisely the possibility that anyone who’s investing in the shares should take into account. This mismatch – the uncertainty must be rewarded. In case of successful development of events shareholder receives more money than if he paid the money to the bank or purchased bonds (while these are investments with less risk). Such are the rules of the financial markets. You can’t expect getting more revenue without incurring more risk.
The distribution of profits and dividends is determined at the shareholders’ meeting. This authority shall approve the balance of the joint stock company, chooses the company’s management and defines in general terms the company’s strategy (basic decisions on the company’s activities). The right to participate in managing the company through a shareholders’ meeting is realized according to the fundamental principle:
1 share = 1 vote means that the management company is similar to a share in the company’s profits, i.e. in proportion to the size of someone’s capital invested in the company. In the same way, that is, in proportion, looks like the issue of the distribution of the company’s assets in the event of its liquidation. In the event of liquidation the preference of satisfying the claims have the creditors of the company (for example, the owners of the company’s bonds). There is another division of shares as well, which deserves a special mention here, as it may make amendments to the previously outlined image of the shares and rights associated with them.
The shares are also divided into:
– ordinary shares (common stocks),
– preferred shares (preferred stocks), although such a division does not occur in each company of joint-stock type, however, it is encountered.
The preferred shares have, as the name suggests, a special status. Their advantages may lie in the fact that:
1. They give the shareholder the right to a fixed dividend. This dividend may also be greater than the dividend received from an ordinary share. The shareholder receives a dividend regardless of the amount of profits made by the company, while the owners of ordinary shares have no such guarantee. The holder of ordinary shares receive a dividend based on the profits earned (and therefore if the dividend occurs, it may be variable), and that’s when the dividend on the preference shares have already been paid. Mode of payment of dividend privileged-constant of preference shares can be differentiated as follows:
– Preferred common shares – shareholder receives a fixed dividend for the years in which the company made a profit.
1. Cumulative Preferred Shares – shareholder receives a dividend regardless of whether a profit has been achieved and whether it has been achieved in the appropriate amount. If there’s no profit, or it’s too small, then the dividends from this type of preferred shares must be paid out of future profits (taken in the burden of future profits).
2. They give or not rights to participate in the company’s assets on liquidation. This may be a priority in the distribution of company assets.
3. They give or not rights to participate in the management of the company (in each case, the owner of preferred shares have the right to vote if the matter of preferred shares is discussed). Preferred share may also give the right to multiple votes.