A stock should be understood as an issue security certifying the deposit of funds for purposes related to the development of the joint-stock company and giving the direct owner the right to participate in management, receive part of the company's property complex in the event of its liquidation, as well as part of the profit of the business entity in the form of dividends. In addition, the shares imply the right of the owner to acquire predominantly new securities, as well as to receive information about the activities of the company. In this article, it will be appropriate to fully consider stocks, their types and classificationsrelevant to date.
Stock as a formal document
It must be remembered that stocks are strictly formal papers. Absolutely all shares of one joint-stock company (joint-stock company) of one issue are developed through uniform forms, in which the following details should be indicated:
- The name of the security, which, as a rule, is stated in large print in the form directly on the felt.
- Location of the joint-stock company (legal address).
- Full name of the joint stock company.
- Type of action.
- Par value of a share.
- Share issue date.
- Sequence number and series of shares.
- The authorized capital of the structure as of the date of issue of the share.
- The total number of actual emissions and so on.
It is important to note that the issue of shares is usually carried out during the formation or transformation of structures into joint-stock companies through an initial issue. In case of some growth of the authorized capital - through the second, as well as subsequent issues.
Stock Features
Before considering classification of shares and bonds, it would be advisable to find out related aspects, which form the basis of the actual topic presented in the article. So, a nominal should be understood as a conditional value, which is expressed, as a rule, in cash and determines the share of the property complex in a joint-stock company, which falls on a separate share. One way or another, these data must be indicated on the front side of the security. By the way, that is why the nominal value in society is often referred to as the common or facial.
Under the market value, it is necessary to consider a value that shows how many times the current price of the stock exceeds the face value. A dividend is nothing more than the income that goes to the owner of a security at the expense of a certain part of the joint-stock company's net profit related to the current year. It is logical that this profit is distributed among all holders of securities in the form of a specific percentage of the nominal value. It is important to note that the shareholders are entitled to dividends in the strictly established manner. In addition, the timing of payment of dividends is determined directly by the joint-stock company. As a rule, they are equated with the annual period, however, a situation often occurs in which the terms are of an interim nature.
Before considering classification of shares and bonds, it should be noted that both individuals and legal entities can hold securities. The joint-stock company that is engaged in their issue is called the issuer. By the way, the “oldest” action in the world, which was sold for 150 guilders, is determined in 1606. Released its first joint-stock company in the world - the Dutch structure "Ost-Indus".
Stocks: their types and classification
Before moving on to the direct characterization of various types of shares, it would be advisable to understand that at present securities are subject to classification in accordance with their principles and additional properties. The latter are assigned to them under special circumstances. The classification of shares under guarantees for dividend payments) implies the relevance of ordinary and preferred shares.
An ordinary security vests the direct owner with a voting right at a stock meeting, but does not guarantee dividend payments. It is important to note that dividends on the presented shares are paid when the structure managed to receive a certain amount of profit during the reporting period, and the decision on the payment of dividends was made at the stockholders meeting and only after the dividend payments were sent to the owners of preferred shares. In accordance with the classification under consideration, ordinary shares are numerous. From the point of view of the Russian legislation in force, their nominal value (share) can reach seventy-five percent (or even exceed this indicator) of the authorized capital of the structure.
Typically, at stock meetings, one share is equal to one vote, but in some cases it may involve a larger number of votes. It is important to know that such securities are called plural. In world practice, constituent stocks as a variety of ordinary shares are widely known. They not only give the owner the right to a greater number of votes, but also the primary right associated with the receipt of shares upon their additional issue. By the way, dividend payments on them, as a rule, are not made in order to maintain the maximum number of votes. It should be noted that under certain circumstances it is advisable to issue deferred shares for which dividends are paid, but only after exceeding a certain level of profit or after dividend payments are made on ordinary shares of the “senior order”, as well as on pre-shares.
Types of ordinary shares
By revising classification of shares and their characteristics we cannot but recall that in countries with a sufficiently developed infrastructure in terms of the stock market, various types of ordinary securities have recently begun to appear, which in a certain way restrict the rights of shareholders. It will be advisable to indicate the following varieties of ordinary shares of limited nature:
- Non-voting shares that do not give owners the right to vote at a stock meeting.
- Stock classification also implies the existence of subordinate securities. One way or another, they give the owner the right to vote, but to a lesser extent (for example, one vote per ten shares).
- Shares with a limited right to vote imply that the owner has the right to vote only if he has a specific number of shares. For example, a shareholder is vested with the right to vote when one hundred or more shares are in his ownership.
It is important to note that the issue of ordinary shares of limited value in Russia is in fact prohibited, as the current legislation provides that the owners of ordinary securities should be vested with equal rights. Having fully studied the category, it would be appropriate to further consider nature, types and classification of shares. The next point is preferred securities.
Preference shares
Preferences (in other words, preferred shares) in general do not give the owner the right to vote at a stock meeting, but they are a guarantee of a fixed dividend and a minimum size of the liquidation value of securities.It is important to note that their nominal value in no case should be higher than twenty-five percent of the authorized capital of the joint-stock company. Different issues of preferred shares of one association may provide their owners with various privileges and rights. The current legislation of the Russian Federation does not enforce any restrictions on this. To date, certain preferred stock classification, in accordance with which it is advisable to highlight the following points:
- Ordinary (simple) preferred shares do not give owners any additional benefits.
- Cumulative preferences give owners the right to vote for the time period during which, in accordance with the decision of the shareholders meeting, they do not receive dividends and lose this right immediately after payment of the accumulated dividend payments in full.
- Stock classification of a privileged nature also implies the availability of convertible securities. In accordance with the provision presented, on the terms and conditions established by the joint-stock company of this kind, shares may be converted (exchanged) for other types of preferred shares of the same structure or for ordinary securities.
What else?
Pending concepts and classifications of shares it was found that preferred securities are divided into certain categories. In addition to the groupings discussed in the previous chapter, it is advisable to single out the following types of prefactions:
- Redeemable or revocable preferences may be repaid by the joint-stock company after a specific time period (or in accordance with a specially defined revocation date).
- Participating preferences give the owner the right not only to receive a fixed dividend, but also an additional one when the dividend payment corresponding to ordinary shares exceeds it.
- Exchangeable preferred shares can be exchanged for bonds by decision of the issuer (joint stock company).
- Preferences with regular dividend payments. In this case, the dividend rate is formed in accordance with the proportion of market interest rates.
- Guaranteed preferred shares suggest that the corresponding payments are guaranteed not by the issuer, but by another company.
- Prefacies with an attached option to sell involve selling a single package at a specific price.
Ownership as a classification criterion
In this chapter it would be appropriate to consider stock classification in accordance with the principle of ownership of the owner. In this case, registered securities and bearer shares are relevant. The first are issued to a specific person. Their owner is subject to mandatory registration in the company registry. It is important to note that the transfer of securities as directed by the owner is executed by a special registrar or issuer. Based on the presented documentation, a special mark is provided in the register of the joint-stock company regarding the transfer of ownership of securities. Pending stock classification It should be noted vinculated securities. They constitute a separate variety of registered shares, which are subject to sale by decision of the owner only after the consent of the joint-stock company (issuer).
The second type, in accordance with the criterion under consideration, is bearer shares that do not contain an indication of a specific person or structure. Their owners are not required to register in the registry. So, securities are sold through direct transfer. It turns out that bearer shares exempt the issuer from the costs of forming and maintaining the register.In addition, the costs of owners associated with the re-registration of property rights in the case of certain transactions with securities are excluded. By the way, the owners are entitled to present them only upon receipt of dividend payments.
Preferential Classification
Today, in accordance with the preferential principle, securities are classified into gold shares and shares with the right. So, the latter provide the owner with a preemptive right to repurchase additional shares. It is important to note that the "golden share" is formed in accordance with the condition of a single copy. One way or another, it gives the owner all the rights provided for owners of ordinary shares, as well as the right to “veto” in the process of consideration by the joint stock company of such problems as liquidation and reorganization of the structure, sale of property complexes, change of the charter of the association, as well as participation in other enterprises. It must be added that the owner is vested with a veto for three years. One way or another, it means the suspension of the action of one or another decision of the shareholders for six months and the subsequent consideration of this issue by the authority that determines the owner of the "golden share". It should be emphasized that the decisions taken by the joint-stock meeting subject to the absence of the owner of the “golden share” are equal to invalid. The “Golden Share” is nothing but the property of the state, with the exception of the right to transfer to trust or pledge. In addition, the sale or alienation of the “golden share” by other methods before the expiration of its validity period is permissible only by agreement of the authority that decided on the issue of the “golden share” in the process of establishing a joint stock company. So, if it is realized or disposed of, the stock becomes ordinary, and the special rights that were granted to the first owner are terminated.
Release form as a classification criterion
In accordance with the form of shares issue, the following classification has been adopted to date:
- Paper stocks.
- Documentary shares.
- Material shares.
- Paperless stocks.
It is important to note that 1-3 points are combined into one set of cash shares, which are issued to the direct buyer in the form of an original document on paper, which is a confirmation of the relevant rights. It must be added that their printing is done by organizations that have a special license. In addition, cash plan blanks come with several levels of counterfeit protection.
Non-documentary shares suggest the absence of a paper document. It should be noted that the fixation of rights to them occurs by entering information about the owners, face value, category and quantity into computer memory or registers (special lists drawn up on paper).
Classification of shares by investment qualities and other classifications
At the time of issue of securities, it is customary to subdivide them into shares of the new issue and shares of the old issue. In accordance with issuers, shares are classified into banking, corporate, stock, as well as shares of investment companies and funds. Classification of shares by investment qualities implies the presence of the following groups:
- Blue chips.
- Cyclic stocks.
- Shares value.
- Promotions barometers.
- Stocks growth.
- Shares of income.
- Speculative stocks and so on.
It is important to note that this classification is also called classification of shares by risk and expected return. Thus, all currently existing divisions are considered. The only thing left to find out is the features of one of the most specific classifications.
This is how the classification by purpose of release looks:
- Debt.
- Equity shares.
It should be noted that this is a form of cash loan. The second is nothing but the display of a share in the authorized capital of a company. Classification of shares by purpose of issue is a testament. So, we can conclude that in the case of planning the implementation of certain transactions with securities, you must be well versed in the theory that is presented in this article.