What are the types of shares?
Ordinary shares are the most common type of shares. They carry voting rights; however, they usually don’t have any special voting rights.
Ordinary shares can be divided into different classes such as A, B or C class shares and carry different share prices and a different number of votes per shares, for example Class A will often be more expensive to purchase and have more votes per share allocated than Class B shares.
As an example, Class A shares may have 10 votes per 1 share that you own, whereas Class B shares may have 1 vote per 1 share that you own. Some ordinary shares have no voting rights.
Non-voting shares are a type of ordinary share that don’t carry voting rights. Often these shares form part of an employee benefit or compensation scheme which usually provide a tax benefit to both the company and the employees that hold the shares.
Preference shares, also known as preferred shares, mean that these shareholders are prioritised over other shareholders and will receive a pay-out or dividend prior to other types of shareholders.
Preference shares carry voting rights; however, you cannot vary the voting rights by establishing different share classes like you can with ordinary shares.
Cumulative Preference Shares
Cumulative preference shares are a type of preference share meaning they give an investor more protection over their investment as they are prioritised over other types of shareholders.
Unlike preference shares, when a company cannot make dividend payments, these payments carry forward for cumulative preference shareholders and must be paid prior to other shareholders receiving a dividend payment.
Cumulative preference shares also don’t carry voting rights.
Bearer shares are commonly issued in the form of a warrant. A warrant is a legal document that is fully transferable and certifies ownership of the shares detailed in the warrant. Warrants give one party the right but not the obligation to buy or sell a share. These warrants come with vouchers meaning the bearer of these shares can claim any due dividends.
Redeemable shares mean that the company issuing the shares has the option to buy back the shares issued which is more commonly referred to as an exercisable option. There is usually a certain time period or given date that the shares can be bought back or redeemed by the company.
Please know, the value of investments can go up as well as down and you may receive back less than your original investment, meaning, when investing your capital is at risk.
Disclaimer: At Evarvest we believe in making investing and investment education more accessible, but we don’t provide investment advice and individual investors should make their own decisions. While we try our best, we cannot ensure the accuracy of the information we provide.
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