top of page

Shares and Shareholders: What You Need to Know

Updated: 4 days ago

16 May 2024

Editor: ET

Shares and shareholders form the bedrock of any company’s financial structure. Understanding what shares are and the role of shareholders is crucial for anyone involved in the business world.

This article, with insights from, explains the basics of shares, the types of shares, and the significance of shareholders.

What is a Share?

A share represents a portion of the company owned by a shareholder in exchange for their financial contribution towards the company’s share capital. Shares can be fully or partially paid up. By purchasing shares, an investor buys partial ownership of the company, gaining certain rights and benefits.

A shareholder can be an individual, a company, or a limited liability partnership. Each share typically entitles the holder to a portion of the company’s profits and assets, proportional to the number of shares they own.

Types of Shares

Companies may issue different types of shares for various reasons, such as maintaining control within certain individuals, offering shares with preferential dividend rights to attract investment, or meeting the diverse needs of investors. Here are the main types of shares:

1. Ordinary Shares

Ordinary shares are the most common type of shares issued by companies. They usually carry voting rights, allowing shareholders to vote on key company decisions. Ordinary shareholders are entitled to dividends, which are paid after preference shareholders have received their dividends. Companies may divide ordinary shares into different classes, such as "A" and "B" shares, each with distinct rights.

2. Preference Shares

Preference shares generally provide a fixed dividend and have priority over ordinary shares in the event of liquidation. They do not typically carry voting rights. Preference shares are attractive to investors seeking stable returns and are issued to raise capital without diluting control.

Reasons for Issuing Different Types of Shares

Companies issue various types of shares to cater to different strategic needs and investor preferences:

  • Control: Certain share classes can be structured to keep control of the company within a specific group of individuals.

  • Investment Encouragement: Shares with preferential rights, such as higher dividends, can be used to attract investors.

  • Liquidation Entitlements: Different shares can offer varied entitlements to company funds if the company winds up, protecting different investors’ interests.

  • Flexibility: Offering different share types allows companies to accommodate the varied needs and preferences of different investors.

Understanding Shareholders

Shareholders are the owners of the company. They invest capital into the company and in return receive shares that confer ownership rights. Shareholders can influence the company’s decisions, particularly through voting rights attached to ordinary shares. They benefit from the company's growth through dividends and capital gains.

Insights from It’s essential for businesses to understand the implications of issuing different types of shares and managing shareholder relations. Properly structured share classes and clear communication with shareholders can enhance investor confidence and support business growth.

Shares and shareholders are fundamental components of a company’s structure. Understanding the different types of shares and the roles of shareholders helps in making informed business decisions and effectively managing corporate finance. For more detailed advice on shares and shareholders, visit

About provides expert financial advice and solutions tailored to help businesses navigate complex financial landscapes, including share issuance and shareholder management.

4 views0 comments


bottom of page