Ordinary Shares: What You Need to Know

Ordinary shares are a type of stock that represents ownership in a company. They give shareholders a claim on a proportion of the company's assets and profits.

As a shareholder, you have voting rights, which means you get to participate in important company decisions. This is a significant benefit, as it allows you to have a say in how the company is run.

Ordinary shares can be issued by public companies, which are companies that are listed on a stock exchange. This means that anyone can buy and sell ordinary shares on the open market.

In contrast, private companies are not listed on a stock exchange, and their shares are not publicly traded.

An ordinary share, also known as a common share, represents equity ownership in a company. It's a way for investors to have a stake in the company's success.

Ordinary shareholders have the right to vote at shareholders' meetings. This means they get to have a say in how the company is run.

The amount of dividends received through an ordinary share can vary and is not guaranteed. You might get a decent return, but it's not a sure thing.

In the event of liquidation, ordinary shareholders are the last to be paid. This means they'll only get their money back after all debts, preferred shareholders, and bondholders have been satisfied.

Ordinary shares offer a chance for individuals to participate in a company's financial success. They come with voting rights, giving investors some control over company management.

The potential for capital growth and income through dividends is a significant appeal of ordinary shares. This can lead to significant returns over time, making them a popular investment choice.

Ordinary shareholders have the right to a corporation's residual profits, which can be paid out as dividends. However, this is not guaranteed, as the company's directors may choose to reinvest profits back into the business.

Ordinary shareholders may also profit from a company's windfall, such as a large profit or a sale to a larger corporation.

Ordinary shares offer a degree of control or influence over company management through voting rights.

Investing in ordinary shares can be a way for individuals to participate in the financial success of a company, and some companies provide dividends that can serve as a source of recurring income.

The value of ordinary shares can increase over time, offering investors the chance for significant returns.

Investors should remember that the value of ordinary shares can also decrease, and dividends may be reduced or not paid at all if the company does not perform well.

Ordinary shares carry risks, particularly from market volatility and the potential for loss if the company underperforms.

Ordinary shareholders have the right to a share of the residual economic value of the company if the business collapses, although they are last in line in bankruptcy court after bondholders and preferred shareholders.

They are entitled to vote for the company's board members and to receive and approve the company's annual financial statements.

Ordinary shareholders may divide a company's windfall profits among themselves, unlike creditors and preferred shareholders who receive fixed amounts.

They usually profit the most when companies like start-ups are sold to larger corporations.

Ordinary shares represent proportional ownership of a company.

These shares come with voting rights equaling one vote per share.

You get to have a say in how the company is run, but only if you own ordinary shares.

As an owner of ordinary shares, you may or may not receive dividends based on a company's performance.

It's like a bonus for the company doing well, but it's not guaranteed.

Here are the key characteristics of ordinary shares at a glance:

Ordinary shares are the most common type of share, giving the owner one vote for each share and equal participation in the dividends of a company. They have voting rights, but always come after preference shares in regards to capital rights.

There are several types of ordinary shares, including non-voting shares, which don't have voting rights and don't give the owner the right to attend general meetings. Non-voting shares are often provided to employees to pay remunerations for getting improved tax efficiency.

Preference shares give owners the chance to get a particular dividend amount each year, received ahead of people who are holding common or ordinary shares. Preference shares may also have liquidation rights in case of a buyout.

Here are the main types of shares used for creating share classes:

Share capital is the total value of the shares issued by a company. In our example above, 100 shares issued at £1 each means the company's share capital is £100.

The market value of shares, on the other hand, refers to the price of the shares if they were sold on the open market, for example, the stock exchange. The market value of your shares may be far higher than the share capital figure.

To illustrate, consider Company X, which has issued 100,000 ordinary shares. If you own 1,000 of these shares, you own 1% of Company X.

The share capital is different from the company's profits, which can be distributed to shareholders in the form of dividends. However, the amount received through dividends can vary and is not guaranteed.

Share capital is a crucial aspect of a company's financials, and it's essential to keep track of it accurately to avoid any errors or discrepancies.

Share classes are a way to assign different rights to various stockholders, addressing issues like dividends, voting authority, and capital rights.

Ordinary shares are the most common type, giving each share one vote and equal participation in dividends.

Non-voting shares, on the other hand, don't have voting rights and don't allow shareholders to attend general meetings.

Preference shares give owners a fixed dividend amount each year, paid ahead of common or ordinary shares.

Redeemable shares can be repurchased by the company, often used with non-voting stocks offered to employees.

Companies can issue multiple share classes, such as Class A and Class B shares, with different voting rights and privileges.

Here's a breakdown of common share types:

Class A shares typically have higher voting rights and are often owned by insiders, while Class B shares have lower voting rights and are often sold at a lower price.

The voting power and price of Class B shares don't necessarily have to be in proportion to Class A shares, as seen in the example of Facebook's Class A shares.

Share class types can be complex, but understanding the different types can help you make informed decisions about your investments.

Ordinary shares are non-redeemable, which means the company can't buy them back from shareholders.

Redeemable shares, on the other hand, are shares that the company issues but may agree to buy back at a future date. This type of share is often issued as preference shares.

Convertible preference shares can be created from ordinary shares, but only if they're non-redeemable.

To do this, you'll need to identify the authority that allows you to make the change, which is usually stated in the Articles of Association.

You may need to amend the Articles to incorporate the rights attached to the new share class.

The Companies Act 2006 doesn't explicitly state the process for conversion, but section 636 requires you to notify the Registrar of Companies if you make any changes to share designations.

Redesignating shares requires a shareholder resolution, which needs to achieve 50% or more of the vote at a meeting or by circulating a resolution for signature.

Ordinary shares are a vital component of a company's capital structure, representing ownership and entitling shareholders to certain rights and privileges.

Recording classes of shares is crucial to avoid headaches down the road. Any errors can lead to difficulties in tracking shares issued to shareholders.

The Eqvista platform offers advanced equity software management that helps record different classes of shares. This includes options, warrants, or convertible notes.

A Summary Page on Eqvista provides an overview of the company's different classes of shares. It also shows any outstanding options, warrants, or convertible notes.

You can also see a detailed breakdown of shares per shareholder on the Eqvista platform. This includes how many shares each shareholder owns of the company.

Each shareholder's details can be downloaded to Excel for easy reference.