What Are Shares? Distinguishing Types of Shares in the Company
The contributed capital of a member of a limited company and a shareholder's share in a joint-stock company both represent that member's ownership of the company's equity. The capital structure and value of limited liability companies and joint stock companies is a complex issue and is governed by many different regulations, including those of the Enterprise Law 2014, the securities law and the law on securities. accounting law.
Joint stock company is the only form of enterprise with specific regulations on shares, share par value, different types of shares (including common shares and preferred shares) and treasury shares.
Accordingly, within the framework of this article, Uplevo will present the nature of shares as well as the characteristics of each type of share in a Joint Stock Company.
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Main content in the article
1. What are shares?
2. Types of shares
1. What are shares?
Shares in a company are understood as an asset class, a type of security to represent shareholders ' ownership with equity, giving shareholders shareholder rights , and finally to show the gender. limited liability of shareholders to the company's obligations.
The ownership of shares by shareholders in a joint-stock company gives rise to the rights of shareholders in accordance with the law and the charter. These rights include five economic rights and five non-economic rights.
Five economic rights of shareholders contributing shares:
Priority right to buy new shares offered for sale
Right to transfer and dispose of shares
Right to request the company to buy back shares
The right to distribute assets when the company is dissolved or bankrupt
Five non-economic rights in the share regulation:
Right to attend and vote at the General Meeting of Shareholders
Right of access to information
Right to convene the General Meeting of Shareholders
Right to nominate a manager
The right to request cancellation of the decision of the management agency
Owning shares also gives rise to obligations of shareholders in accordance with the law and the charter. Most important is the liability for the company's debt obligations. In this respect, shares represent the limit of the shareholder's liability for the company's debt obligations.
The company has legal status and is solely responsible for its assets. Shareholders have only limited liability in the value of shares they have actually contributed or pledged to contribute.
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2. Types of shares
Shares in a Joint Stock Company can be divided into two basic types: common shares and preferred shares. The basic principle of the Enterprise Law 2014 is that each share of the same class confers on its holder " equal rights, obligations and benefits " (Article 113, clause 5).
Therefore, all shareholders who own common shares or preferred shares of the same class have equal rights and obligations based on the number of classes of shares they own. The rights and obligations of shareholders owning common shares or preferred shares are stipulated in the law and the company's charter.
#first. Common shares
Ordinary shares are the basic and default class of shares for all joint stock companies. Any joint stock company has common shares while not necessarily preferred shares.
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#2. Preference shares
The 2014 Enterprise Law allows joint stock companies to issue the following four types of preferred shares:
a. Voting preference shares:
Voting preference shares are shares with more votes than ordinary shares. The number of votes of a voting preference share shall be prescribed by the company's charter.
Voting preference shares are only for:
Organizations authorized by the Government to represent the State's capital share in State-owned joint stock companies
Founding shareholders in the first 3 years of any joint stock company.
Shareholders owning voting preference shares may not transfer such shares to other people.
b. Dividend preference shares
Dividend preference shares can be higher than common stock dividends (although not necessarily). Dividends of dividend preference shares may be paid even if the joint stock company is not profitable and does not meet the conditions applicable to the distribution of dividends of common shares.
These are two factors that show the preferential nature in receiving dividends of shareholders who own dividend preference shares.
c. Refundable preferred shares
Shareholders owning redeemable preference shares are entitled to " return of contributed capital by the company at the request of the owner or according to the conditions recorded in the shares of redeemable preferred shares " (Article 118, Clause 1 of this Article). ).
Since the company is obligated to redeem at any time upon request of the redeemable preferred stockholder or under the conditions stated in the shares of redeemable preferred shares, redeemable preferred shares has the same nature as a company's debt, although it can still be recognized as an item in equity.
d. Other preferred shares
The 2014 Enterprise Law allows “other types of preferred shares” as provided for in the company charter. Therefore, if the company wants to issue a specific type of preference share which has not been clearly defined in the Enterprise Law 2014, the charter needs to stipulate that type of preference share.
Any other type of preference shares, for example a combination of dividend preference shares and redeemable preference shares or having the feature of payment preference in the event of bankruptcy or dissolution, should be specified in the Articles of Association. rate and shares of the above class of preferred shares.
In summary, shares are one of the forms of businesses that can raise capital in large quantities and quickly. However, the registration and establishment procedure of a joint stock company is relatively complicated, requiring business owners to have more legal knowledge than that of a private enterprise and limited liability.