Each company offers different types of shares to its shareholders. The type of share offered will give different rights such as voting privileges, dividends, capital, etc.
Ordinary shares
are the most common type of share, and most companies only offer these types of shares. Ordinary shares represent the companies basic voting rights and represent equity ownership of that company. These types of shares typically offer 1 vote per share. Also, ordinary shares give equal rights to dividends. Finally, these shares give rights to the distribution of the companies assets in the event of winding-up or sale. You can find the information about a stock’s shares in the articles of association or the shareholder’s agreement.
Deferred shares
are much more restrictive then Ordinary shares. Dividends could be held before certain events or dates. They could also not be distributed until all other classes of shares have been paid out. Deferred shares could also restrict their ability to be traded. Not allowing shareholders to trade until a specific time-frame. Usually, these types of shares are issued by employees to promote loyalty and give a long term interest in the company. Another reason these types of shares exist is for the event of insolvency. The shareholders’ rights may be restricted until all other shareholders have been paid.
Non-voting shares
are similar to ordinary shares, except they do not offer voting rights. This is beneficial for a company because it can increase the number of shares offered while maintaining control of the company. These types of shares are usually given to employees or family members of the main shareholders.
Redeemable Shares
are usually the same price as the issue price, but not always. These shares may be redeemed by the company as they wish. There may be a time frame before they can be redeemed by the company or they may be redeemed at any time, depending on the situation. These types of shares are typically given by employers so that they may redeem the shares in the event of the employee leaving the company. The ability to redeem these shares is limited according to specific statutory requirements. For example, the company may redeem from the proceeds of new shares or profits from pre-existing shares.
Preference shares
are commonly given out to investors of startup companies. These types of shares give preference to the shareholders allowing them to receive dividend payments before ordinary shareholders. Usually, these shares don’t offer the same voting rights as ordinary shareholders and are also commonly redeemable. Redeemable preference shares are a good way for startup companies to fund their business and allow them to buy the shares back in the future. This is useful, for example, when interest rates go down. The company may wish to buy the shares back and offer new shares with a lower dividend rate.
Management shares
offer more voting rights than ordinary shares. for example, one share could be worth 2 or 3 votes. These types of shares are usually given to company directors to maintain the majority of the companies voting rights while still giving shares to outside investors.
Alphabet shares
are simply a subclass of ordinary shares. These types of shares let the company create different groups of shares to distribute. Each group could be given a different name and have different advantages. For example, “group A” could offer a higher dividend yield then “Group B”. Different groups could offer other advantages such as more voting rights, or rights to capital.
