Ordinary shares are the basic ownership units of a company that give shareholders voting rights and a claim to the company's profits and assets.
Ordinary shares represent the most common form of company ownership.
They give you voting rights in company decisions and entitle you to receive dividends when the company distributes profits.
If the company is sold or wound up, ordinary shareholders have a claim to remaining assets after all debts and preferred shareholders are paid.
Ordinary shares typically carry voting rights, whilst preference shares often don't but may have priority for dividend payments.
Ordinary shares usually receive dividends only after preference shareholders are paid.
Unlike debt instruments, ordinary shares don't guarantee fixed returns and their value fluctuates with company performance.
Ordinary shares grant voting rights on major company decisions, including director appointments and significant transactions.
Shareholders can attend annual general meetings and vote on resolutions.
They also have rights to receive dividends when declared and to inspect certain company records.
Ordinary share value depends on the company's overall valuation divided by the total number of shares outstanding.
In early-stage companies, valuation often relies on projected future earnings, comparable company analysis, or recent investment rounds.
Professional valuations may be required for tax or investment purposes.
During investment rounds, new ordinary shares are typically issued to investors, which dilutes existing shareholders' ownership percentages.
Alternatively, investors might receive preference shares with special rights.
The share price for new ordinary shares is usually set through negotiation based on the company's pre-money valuation.
Ordinary shares determine voting control in company decisions.
Founders often retain majority control by holding more than 50% of ordinary shares.
Some companies create different classes of ordinary shares with varying voting rights to maintain founder control whilst raising capital.
Ordinary shares may generate taxable income through dividends and capital gains when sold.
The timing and rate of taxation depend on how long shares are held and local tax regulations.
Share option schemes and employee share ownership plans have specific tax rules that vary by jurisdiction.
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