Business, Legal & Accounting Glossary
Shares in a company which entitle the holder to a share of the dividend declared and a share in net assets on closing down the business.
stock other than preferred stock; entitles the owner to a share of the corporation’s profits and a share of the voting power in shareholder elections.
Companies are incorporated with an authorised share capital – for instance, 1,000 ordinary £1 shares. They do not have to issue all the authorised shares, but can issue as many as they like up to the authorised number.
Once issued the shares can be traded either privately or on an exchange if the company has listed them. The price at which they trade will have nothing to do with the par value, but will be determined by market forces. Broadly speaking, if there are more willing buyers than sellers, the price will rise; if there are more sellers than buyers, it will fall.
Shares usually come with a right to vote at the company’s Annual General Meeting, and an entitlement to a share of dividends declared. They are, however, unsecured. This means that shareholders are last in the queue if a company goes bust and has to sell off its assets. If the amount realised is enough to pay off all creditors, the shareholders may salvage something. If it isn’t, the shares will be worthless.
Ordinary shares represent ownership in a limited liability company.
Upon winding-up, they are entitled to two thirds of the balance of the company’s assets after £1 million has been distributed to the owners of ordinary shares.
These shares offer dividends like ordinary shares but unfortunately don’t allow their holders either voting power or representation.
ordinary share, common share, common stock, equity shares, common shares
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This glossary post was last updated: 26th April, 2020 | 0 Views.