Below are the different types of share capital of a company:-
Preference Shares, Ordinary Shares, Deferred Shares, Redeemable Shares and Share Warrants to Bearer.
Preference Shares are shares which normally entitle the shareholders a priority to receive a fixed rate of dividend out of the profits of the Company (current year only) per annum. Different classes of preference shares may exist. Preference shares are usually cumulative and non-participating. They cannot participate to further profits after dividend, except specified in terms of issue. Some preference shares are participating. Preference share do entitle the holder to preferential repayment of capital but not participate to surplus assets in case of winding up. The rights of each class of preference share will vary according to the company’s AOA and the specific terms of issue. The holders usually do not have voting rights at general meeting as the ordinary shareholders. In practice, the preference share holders are given the right to vote at the general meetings only if the dividend is in arrears, or there is a resolution to reduce capital or to wind up the company, or the resolution is likely to affect their class rights.
Ordinary shares do no entitle their holders to a fixed dividend. Dividend is payable only when declared by the company. Ordinary shares are the equity shares of company, the shareholders are entitled to equity or residue of profits of the company. It carries voting power per share. The shareholders are the ultimate owners of the company and can only get their repayment of capital after other shares. Ordinary shareholders can participate to any surplus assets in case of winding up. The rights of ordinary shares will be specified in the APA or in the terms of issue and may vary considerably, in particular, with regard to voting power.
Deferred shares also known as founder’s management shares, they are not common and usually issued to the vendors of a business in full or...
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