Shares are either ordinary deferred, or preferred.
An ordinary share is a portion of a company’s trading capital, entitling its owner to a proportional portion in the profits of the business.
Shares are called deferred when entitling their owners to no share in the profits of the business, or only to a part of the full share, proportional to the pecuniary interest taken in the concern; the enjoyment of such rights being deferred to some future date, or event.
Preferred or preference shares are issued by companies when forced to raise an additional capital to meet the pecuniary requirements of the undertaking. As a special inducement to subscribers, such shares entitle the holder to a prior claim to profits, up to a certain point, over the ordinary shares already issued ; hence their name of preference shares.
ADVERTISEMENTS:
On forming a joint-stock company and determining the share capital, the founders usually retain for themselves a number of shares, which are hence called founders’ shares, and enjoy certain privileges over the ordinary shares.
The most important of such privileges is that a fixed percentage of the company’s profits is to be divided among the founders’ shares to the exclusion of ordinary shares.
The holder of a single one of such shares has, besides, the full right of voting at the company’s meetings, while the possession of a certain number of ordinary shares is required to confer sought a right. He is also empowered to make any inquiry into the company’s books.
Founders’ shares are transferable from one to another like ordinary shares, and in highly remunerative undertakings they reach enormous prices.
ADVERTISEMENTS:
Transfer of Bonds and Shares.-
As regards the holder, stocks, bonds, and shares are either to bearer or registered; the former, as freely negotiable, being more easily dealt with than the latter. The mere passage of the stock or share certificate from hand to hand is sufficient, in fact, for the transfer of stock to bearer; while registered stocks, being entered in the name of the holder, have the advantage of greater security against loss, theft, etc. They are, however, encumbered with many formalities, both for the collection of dividends and for the operation of transfer, the latter being effected by a special deed, usually drawn up in the following form :-
There is an important difference between the transfer of shares and that of stock.
The capital represented by each share is inseparable, so that the holder cannot transfer a fraction of it unto a buyer; while any amount of stock, to the fraction of a penny, may be transferred from one person to another.
ADVERTISEMENTS:
This advantage renders stock a much more preferable form of investment than shares, and it is therefore consented to by law that shares fully paid up may be converted into stock.
The bonds and shares negotiated on the English markets are, for the most part, registered or, as they are also called, inscribed.