In
finance
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fina ...
, a share class or share classification are different types of
shares in company
share capital
A corporation's share capital, commonly referred to as capital stock in the United States, is the portion of a corporation's equity that has been derived by the issue of shares in the corporation to a shareholder, usually for cash. "Share capita ...
that have different levels of voting rights. For example, a company might create two classes of shares
class A share
In finance, a class A share refers to a share classification of common or preferred stock that typically has enhanced benefits with respect to dividends, asset sales, or voting rights compared to Class B or Class C shares. There may be restri ...
and a
class B share
In finance, a Class B share or Class C share is a designation for a share class of a common or preferred stock that typically has strengthened voting rights or other benefits compared to a Class A share that may have been created. The equity st ...
where the class A shares have fewer rights than class B shareholders. This may be done to maintain control of a company by a group of shareholders or to make a company more difficult to take over.
For example, a company may create
preferred stock
Preferred stock (also called preferred shares, preference shares, or simply preferreds) is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt ins ...
as a
poison pill that so that all Shareholder of
common stock
Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Com ...
cannot agree to a merger or takeover plan.
There is no statutory procedure for converting shares from one class to another. It may be done with the consent of all the shareholders affected. The safest course is to pass a resolution to which all the shareholders consent because, in practice, changing the rights on one person's shares may well have an effect, at least in practice on the rights of all the other shareholders.
Classes
Companies can have the following classes:
*
Ordinary shares
Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States. They are known as equity shares or ordinary shares in the UK and other Comm ...
*
Preference shares
Preferred stock (also called preferred shares, preference shares, or simply preferreds) is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt inst ...
*
Non-voting stock
Non-voting stock is the stock that provides the shareholder very little or no vote on corporate matters, such as election of the board of directors or mergers. This type of share is usually implemented for individuals who want to invest in the com ...
*
Redeemable shares
*
Convertible shares
* Deferred shares
See also
*
Partly paid A partly paid share is a share in a company which has only partial been paid compared to the par value, with the understanding that as the company requires more funds, calls will be made from time to time to request more money until the shares are ...
*
Phantom stock
Phantom stock is a contractual agreement between a corporation and recipients of phantom shares that bestow upon the grantee the right to a cash payment at a designated time or in association with a designated event in the future, which payment is ...
*
Restricted stock
Restricted stock, also known as restricted securities, is stock of a company that is not fully transferable (from the stock-issuing company to the person receiving the stock award) until certain conditions (restrictions) have been met. Upon satisfa ...
*
Shareholder
A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal own ...
*
Stock option
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified dat ...
References
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Equity securities