Types of Shares and Their Explanations (Full Discussion)
Types of Shares and Their Complete Explanation - Previously discussed about Understanding stocks and bonds, and on this occasion we will discuss the types of shares themselves. Shares (equity) are securities that are inherent in society as a sign of the ownership of a person or entity in a company.
Shares are in the form of a piece of paper which explains who the owner is. However, currently the form of share ownership is no longer in the form of sheets of stock paper bearing the owner's name but in the form of an account on behalf of the shareholder without scrip. The types of shares will be explained below.
Types of Shares and Their Explanations (Full Discussion)
Here we will discuss the types of stocks very carefully, let's see.
Types of Shares
There are two types of shares based on collection rights or ability to claim, namely as follows:
Common Stock
This type of stock is the most frequently used and most popular in the capital market because the owner of this type of share will receive dividends if the company earn profits/profits and do not receive dividends when the company is in bad condition and has voting rights at the General Meeting of Shareholders (GMS).
If one day the company is liquidated / bankrupt, these shareholders will receive rights to the remaining assets of the company or after paying off debts to other parties. The characteristics of these ordinary shares include: Obtaining the remainder of the company's assets or assets in the event of liquidation, having voting rights and being able to elect the board of commissioners, whose rights take precedence.
Preferred Stock
This type of preferred stock means that shareholders get special and definite rights in dividend payments compared to common types of shares. If one day the company is liquidated, these types of shareholders will get the rights to the remaining assets of the company. Which was before common stockholders and whose rights are higher than common stockholders. This means that the amount of dividends received is usually predetermined.
The characteristics of this type of shares include: cumulative dividends, convertibility (can be exchanged into ordinary shares), have levels, have higher rights than ordinary shares, do not have voting rights like ordinary shares in a GMS, the distribution of dividends takes precedence, if the company goes bankrupt then the distribution of the remaining assets takes precedence before it falls to the shareholders normal.
There are two types of shares based on the method of transfer, namely:
Bearer Stocks
- The name of the owner is not written on these shares, so that they are easier to transfer from one investor to another.
- Whoever legally holds the shares is the one who is recognized as the owner and has the right to attend the GMS.
Registered Stocks
- Shares of this type are written clearly, the name of the owner, the method of transfer must go through a predetermined procedure.
Thus our explanation of Types of Shares and Their Explanations (Full Discussion), I hope the article above can be useful for all of us. That is all and thank you.
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