The registered capital of a company is divided into a fixed number of units. Each of these units is known as a share. Companies issue these shares in order to raise capital. There are several types of shares: The rest of this article provides a description of these different types of shares. Holders of ordinary shares do not enjoy a fixed dividend rate. Instead, holders receive dividends only after preference shareholders are satisfied. They do not receive any dividend if no surplus of profit is left after the preference shareholders are paid off. Ordinary shares are also called common shares or equity shares. Preference shares are those where the holders enjoy a fixed dividend. Holders enjoy a preference in the receipt of dividends and repayment of capital. Holders of preference shares receive a dividend payout before ordinary shareholders. Preference shares are divided into the following classes: On these shares, a fixed rate of dividend for each year is payable out of current or future profit. If the profit in any one year or a series of years is not sufficient to pay, the dividend accumulates and must be paid out of profit available in any future year before the other shareholders can rank for a dividend. In the case of these shares, a fixed rate of dividend is payable only out of the profit of each year. If the profit of any year is insufficient to pay the dividend, no arrears of the dividend are carried forward to the next year. Participating preference shares are those which give holders, in addition to a fixed dividend, a right to share in the surplus profits after all other shareholders have received a specified dividend rate. The holders of these shares are, at the option of the company or after a fixed period, paid back the entire capital they contribute. The amount of these shares is not paid during the existence of the company. It means that these shares are only redeemable after the winding up of the company. These shares are generally issued to the founders/promoters of the company in consideration of the services they render. Deferred shares receive their name because the dividend on them is paid after all other classes of shareholders have been fully satisfied. These shares are also known as founder's shares.Shares: Definition
Types of Shares
Ordinary or Common or Equity Shares
Preference Shares
Cumulative Preference Shares
Non-cumulative Preference Shares
Participating Preference Shares
Redeemable Preference Shares
Irredeemable Preference Shares
Deferred Shares
Types of Shares in a Public Limited Company FAQs
Shares is the value of the company owned by all shareholder.
There are several types of shares. Ordinary or common or Equity Shares, preference shares, and deferred shares are some of the types of shares that exist in a company.
A share that has voting rights is known as an ordinary share. As the name suggests, it entitles the shareholder to vote at the time of the company's general body meeting or agm.
Preference or preemptive shares are those in which holders receive a fixed dividend every year throughout the life of the company. The amount of dividend is decided before the distribution of profit on ordinary shares.
Deferred shares are those in which no dividend is payable to the holders by the company during its lifetime.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.
