Types of Shares

Question 1

What is Ordinary shares

Answer 1

● Ordinary shares only receive dividends when profit is made.
● Normally the higher the net profit, the higher the dividend.

Question 2

Rights of ordinary shareholders?

Answer 2

Shareholders have a right to:
● Attend the AGM to learn about the company’s performance & vote.
● Receive interim and annual reports.

Question 3

What is Preference shares?

Answer 3

●Receive fixed rate of dividends regardless of whether a profit is made.
● Dividends are payable according to the type of preference share.

Question 4

What rights of preference Shareholders have?

Answer 4

• Receive a fixed rate of dividends regardless of how much profits are made.
• They are paid first dividends.
• Receive interim and annual reports.

Question 5

What is Founder’ shares?

Answer 5

Issued to the founders, incorporators or promoters of the company. They receive dividends after all other shareholders are paid.

Question 6

what is Bonus shares?

Answer 6

● Payment in the form of shares to shareholders, Issued as compensation for unpaid dividends

Question 7

Name 5 types of Preference Shares?

Answer 7

1. Participating Preference Shares
   2.Non-Participating Preference Shares
   3.Cumulative Preference Shares
   4.Non-cumulative preference shares
   5.Redeemable Preference Shares

Question 8

Explain 5 types of preference shares?

Answer 8

1. Participating Preference Shareholders: are guaranteed minimum fixed dividends and entitled to share in any surplus profits.
   2.Non- participating Preference shareholders: receive an amount equal to the initial investment and they are not entitled to any surplus profits.
2. Cumulative Preference Shareholders: are compensated for past dividends not previously paid out when profits were low.
   4.Non-cumulative preference shareholders are not compensated for past dividends that were not paid out when profits were low.
   5.Redeemable Preference Shares can be bought back at the option of the issuing company, either at a fixed price on a specified date or over a certain period.

Question 9

3 Differences between ordinary and preference shares?

Answer 9

-Ordinary shares only receive dividends when profit is made while preference shares receive dividends regardless of profit made.
-With ordinary shares the higher the profit, the higher the dividend but with preference shares a fixed rate of return is paid on this type of shares.
- Ordinary shares, the shareholders have a right to vote at the Annual General Meeting but with preference shares voting rights are restricted to circumstances/resolutions.