Shares with bonds

A preferred share only brings advantages and a common share is reserved for regular customers? Not quite. The names are sometimes misleading - there are decisive differences. An overview.

Modern company law leaves it to the company to treat all shareholders equally or to issue different types of shares to different shareholders. How said https://thetradable.com distinction is made between voting rights, transferability, company share and time of issue.

Shares with and without voting rights

Anyone who chooses a common share not only acquires a stake in the company, but can also have a say from now on. The shareholder exercises his voting rights at the general meeting, which usually takes place once a year. Here, the shareholders can take the pressure off the board of directors and the supervisory board - that is, confirm the two committees that they have managed properly in the past few months. 

The general meeting also regulates, among other things, how the profits of the stock corporation are used, whether the capital is increased or who is appointed to the supervisory board. Holders of ordinary shares can therefore steer the course of the company a little at least once a year. Even if the voice is usually only one in hundreds of thousands.

Buyers of preferred shares as generally waive their voting rights, but receive preferential dividend rights. In the event of a company liquidation, their claims against the owners of ordinary shares will be satisfied. Conversely, buying preference shares also poses a risk. Management decisions cannot be influenced by preferred shareholders at the Annual General Meeting.

Shares with and without transfer rights

Bearer shares are made out to the respective holder, who can exercise the rights arising from this. The transfer takes place through agreement and handover. The company cannot influence the group of shareholders with the bearer share because it does not know who bought the share. The buyer does not have to provide his name and data and is not recorded in any register. The share is therefore considered to be easy to trade: as soon as you sell the security, you transfer all rights and obligations to the new owner without the company knowing or having to agree to it. Company notifications to owners are made through public media such as newspapers. Invitations to general meetings are sent to the owners by the custodian banks.

It is different with the registered shares, which are now much more common. Here, the shareholder and the stock corporation are more closely linked because the buyers have to register in the company's share register. The corporation communicates directly with the buyers, so it can also check the creditworthiness of its shareholders and keeps an overview of who holds exactly how many shares or whether, for example, a shareholder accumulates an unusually large number of securities in a short time.