Posted: 17. April 2016 by: Rupert Tennant

Types of Shares and How to Allot Them

During the giving out of shares in a company, the hierarchy level is considered. Types of shareholders in an organisation vary from owners, managers, capitalists and workers. It is right to say the denominations of shares are quite helpful as there is elasticity in types of ownership in the firm. In turn, this gives an opportunity for businesses to give shares as profits to workers. There are different types of shares in a company, and they are well elaborated below.

Ordinary Shares

We have various forms of shares to identify when dividing up shares.  Most of the ordinary stakeholders acquire the standard shares. These standard ordinary shares provide stakeholders with the power to have rights especially in matters of voting for any leader in the firm also surplus payments which of course, is influenced by the percentage of shares they actually have. Ordinary shares have different characteristics; thus, some of them will have a different format. This will lead to some of the rights the shareholders enjoy to be taken away from them, such as voting about how the business will flow in future. Normally, shares are used by workers to get extra cash which comes as a benefit wrap up. Family members of the stakeholders also benefit in one way or another in terms of taxes.

Preference Shares

These types of shares provide shareholders with dividend payments at a fixed percentage of profits, whilst ensuring priority on the return of capital in cases of winding up. Although voting is not necessarily included, surplus money for the stakeholders is in plenty as it is done at a fixed percentage of profits. Even as shareholders enjoy the dividends, they have to give back capital to the firm. Redeemable shares are a popular option, particularly for growing businesses. They allow companies to buy back their shares at a later date. These are good for businesses that wish to obtain funding in the early stages where financial resources are scarce but would like the opportunity to regain ownership when the company becomes financially stable.

Management Shares

Another type of shares is Management shares. These types of shares are a form of giving power to stakeholders. This is easily accomplished by increasing the voting rights, time and again by providing more than one vote per share or making the standard ordinary shares is at a very low price. Therefore, it will ensure stakeholders have a powerful say in regards to decisions being implemented in the firm.

 

In order to ensure a business organisation is running smoothly, it is vital to give out shares to the people at the top of the hierarchy level in your organisation wisely. The apportioning of shares will hugely depend on the input and capitalisation each individual actually makes. For small groups of owners, it is advisable to dispense management and voting shares, whereas for the larger groups distribute the redeemable or non-voting shares as their purpose in the company is not crystal clear. This is a very effective way of dealing with conflicts over the distribution of shares. Non-voting shares are offered to the stakeholder in case the firm lacks enough salaries for all the shareholders present.