Ordinary shares usually carry voting rights - thus shareholders have a say at the annual general meeting and at any other shareholders meetings.
Preference shares
Whereas ordinary share dividends will vary from year-to-year, preference shares usually carry a fixed percentage rate of dividend - for example, ten percent of nominal value. Their dividends are paid in preference to those of ordinary shareholders: but they are only paid if the company makes profits. In the event of the company ceasing to trade, the preference shareholders will also receive repayment of capital before ordinary shareholders.
Preference shares do not normally carry voting rights.
Nominal and market values of shares
Each share has a nominal value - or face value - which is entered in the accounts. Shares may be issued with nominal values of 5p, 10p, 25p, 50p or £1, or indeed for any amount. Thus a company with an authorised share capital of £100,000might state in its Memorandum of Association that this is divided up into:
100,000 Ordinary shares of 50p each £50,000
50,000 ten percent preference shares of £1 each £50,000
£100,000
The nomainal value usually bears little relationship to the market value. The market value is price at which issed - or secondhand - shares are traded. Share prices of a quoted public limited company may be listed in the Financial times.
Issue price
This is the price at which shares are issued to sharegolders by the company - either when the company is being set up, or a later date when it needs to raise more funds. The issue price is either at Pr ( ie nominal value), or above nominal value. In latter case, the amount of the difference between issue pric and nominal value is known as share premium for example - nominal value £1.00; issue price £1.50; therefore share premium is 50p per share.
Loans and debentures.
In addition to money provided by share holders, who are the owners of the company, further funds can be obtained by borrowing in the form of loans or debentures:
Loans are monies borrowed by companies from lenders - such as banks - on a medium or long-term basis. Generally repayments are made throughtout the period of the loan, but can often be tailored to suit the needs of the borrower. Invariably lenders require security for loans so that, if the loan is not repaid, the lender has an asset - such as property - that can be sold.