Download our free guide to understand your corporate governance responsibilities.<\/p>\n <\/div>\n \n\nDownload Now<\/a> <\/section>\n <\/div>\n\n\n\n\n Holders of company shares obtain a bundle of rights in the company. Shares with the same rights attached to them as another set of shares are of the same class<\/a>. Shares with different rights compared to another set are of a different class. <\/p>\n\n\n\n The three most important rights attached to shares relate to:<\/p>\n\n\n\n Therefore, when you hear people refer to ordinary versus preference shares, they are referring to shares of different classes. <\/p>\n\n\n\n If your company has only one class of shares, in most cases, the shares will be ordinary shares. Companies with more than one class of shares usually have ordinary shares in addition to the other class(es), though there is no obligation to call them ordinary shares.<\/p>\n\n\n\n Ordinary shares typically have the following rights attached to them:<\/p>\n\n\n\n An ordinary share entitles the shareholder to vote at shareholder meetings. Typically, upon a poll vote, one share equals one vote. However, there is some degree of flexibility. Your company could create another class of shares identical to ordinary shares in all other respects except voting rights, which may be weighted differently. <\/p>\n\n\n\n These \u201cdual share structure\u201d companies are common in large family-owned businesses or certain publicly traded companies. In such cases, the company may have \u201cA Shares\u201d and \u201cB Shares,\u201d where, for instance, A shares have twice the voting power compared to B shares.<\/p>\n\n\n\n An ordinary share entitles the shareholder to a proportionate share of any declared dividends. <\/p>\n\n\n\n Suppose Craig holds 25% of the company\u2019s ordinary share capital, and the company declares a $10,000 dividend. Here, Craig is entitled to $2,500.<\/p>\n\n\n\n Directors typically authorise dividend payments. In some cases, shareholders can approve it at a general meeting<\/a>.<\/p>\n<\/div>\n\n\n\n The usual rule is that the company cannot release its capital to shareholders except through specific means like dividends. That is, once Hannah invests $10,000 in the company, she has no general right to demand its return. <\/p>\n\n\n\n However, companies may cease to trade for a variety of reasons, including:<\/p>\n\n\n\n In such cases, the law allows the company\u2019s assets to be disbursed to shareholders, provided there is enough left over after repaying creditors. This process is called winding up<\/a>. Ordinary shareholders are entitled to any surplus assets remaining following a wind up in proportion to the shares held.<\/p>\n<\/div>\n\n\n\n For instance, suppose that following the end of the business venture, a company has $50,000 in assets after all creditors are repaid. If the only shareholders are ordinary shareholders, Craig would get $12,500. <\/p>\n\n\n\n If a company is insolvent, there are typically no assets left after repaying creditors in a windup. In this case, Craig gets nothing. <\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\nShares: An Overview <\/h2>\n\n\n\n
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What Are Ordinary Shares?<\/h2>\n\n\n\n
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Right to Vote<\/h3>\n\n\n\n
Right to Dividends<\/h3>\n\n\n\n
Return of Capital <\/h3>\n\n\n\n
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\n Corporate Governance Guide for SMEs in NZ<\/div>\n
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