21 November 2011
Important Basic Information About Company Shares Posted: Apr 29, 2010 |Comments: 0 | Views: 152 |
Company shares equate to company ownership. If a company wants to sell its ownership rights, it will sell its shares to the public, and those who do decide to buy these will be given a share of the profits and to some extent, take part in decision-making processes. A person who has bought company shares is referred to as a shareholder, and he has the option to buy as many shares as allowed by the company and his power would depend on the number of shares he has bought. This means that if everyone has bought 20 shares each, then they have equal rights and responsibilities; however, if one person bought 30 and the rest have only 20 or less, then this person has more power over others and gets a larger yield as well. Usually, company shares can be purchased by anyone- even the employees of the company. And it is the board of directors that will have a say on the amount of dividends that shareholders are entitled to, with due consideration to the company profits. If a businessman decides to set up a limited company, it is necessary to decide on the number of shares that shareholders can get and for how much (cost per share). Remember that shareholder control and profit percentage would depend on the number of shares. When dealing with company shares, make sure to consider the following factors:1. Authorized share capital- this refers to the total amount of shares to be created.2. Issued share capital- this refers to the total amount of shares you want to offer shareholders.3. Share certificates- this refers to the acknowledgment paper issued to a shareholder.4. Controlling interest- this refers to the level of control a shareholder can have; a shareholder with 50% share capital has higher control over the company.
Types of Shares There are different types of shares. These are: ordinary shares, convertible shares, preference shares, and redeemable shares. Ordinary shares are the most commonly applied today and carries voting rights and with no restrictions. Shareholders can vote in general meetings and have equal rights in terms of capitals and dividends. Convertible shares are those that you can convert to other types of shares at a time predetermined by the board of directors. Preference shares are low risk shares and shareholders of this type of share are given more priority and security. Fluctuations will hardly affect dividends as compared to other types. Lastly, the redeemable shares come with agreement that allows the company to buy back the shares in the future as specified in the terms of the contract. In order to determine how many shares should be issued, you need to check your capital and the corporation laws in your country. But essentially, the correct value should be realistic and enough for your business to function, as well as satisfactory for shareholders and clients. Learn as much as you can before starting a business, especially for something as important and valuable as company shares. This way you will be able to start your business right.
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