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Companies offer their shares in the equity markets to get investment from the private investors or institutes to better run their business operations. While sometimes companies issue their issues to get investment for a short term project. Based on various purposes, companies offer multiple types of shares in the open markets (AUSTIN, 2019). Although, some companies may only ever have one type of shares for their investors. In this report, various kinds of shares are discussed in detail with regard to dividend policies, the purpose of issuance, and time of issuance. The document is also aimed to highlight difference in these shares. Companies offer their shares in the equity markets to get investment from the private investors or institutes to better run their business operations.

 Types of Shares

Shares issued by the listed companies vary in regards to the issue time and purpose of their issuance. The following are some major types of shares commonly issued by the companies.

Ordinary Shares:   the ordinary shares represent the portion of equity investment by private investors in a corporation. The investors of ordinary shares are known as ordinary shareholders or common shareholders. As the standard shares, ordinary shares does not oblige the investor for some special restrictions. Moreover, investors of ordinary shares are not given some special rights in the organization. For instance, ordinary shareholders are not invited for general suggestions and decision making in the corporate management meetings at corporations regarding business expansion or business operations of the corporation. Somehow, the ordinary shareholders are given authority to elect the board of directors by their votes and suggestions. In simple terms, ordinary shareholders are also called as business owners because of their direct interest in the profitability or return of the business operations (AUSTIN, 2019).  

However, these ordinary shareholders or common shareholders are also allowed for voting regarding dividend declaration as preferred shareholders have no rights to decide about the declaration of dividend. Moreover, ordinary shareholders are paid dividend after meeting the requirements of the company's preferred shareholders. According to the rules, the company equally distribute dividend payment in all ordinary shareholders if the company is wound up. Although, companies face some restrictions while issuing these ordinary shares. For instance, a company cannot set the price of ordinary shares as these shares are offered at market value. Additionally, companies are required to follow up limitation for the total number of issued shares. The total number of allowed common or ordinary shares to be offered by the company in a specified duration is known as shares outstanding. These kind of shares are most beneficial for the investors therefore the majority of private investors and investing institutes prefer to invest in the ordinary shares of a company.

Non-voting Ordinary Shares: Non-voting ordinary shares are quite vary from the ordinary shares offered by a listed company. The owners of these shares are called non-voting ordinary shareholders. These kinds of shares are considered non-voting ordinary shares because the owners of these shares are not given permission to participate in the voting of dividend declaration. All voting rights are only given to the ordinary shareholders (or common shareholders) in the corporations. Moreover, these shareholders are not required to attend general meetings conducted by the corporate management and finance offices of a corporation. However, after the declaration of the dividend, the non-voting ordinary shareholders are paid first. Mostly in large scale corporation, non-voting ordinary shares are given to the employees. Thus, when a company declare dividend they receive remuneration as dividends for the tax efficiency of the company. Excluding the voting rights, all other characteristics and rights of non-voting ordinary shareholders are the same as the ordinary shareholders (Nibusinessinfo.co.uk, 2020).

Preference Shares: The preference shares are also categorized as preferred shares. The investors of these shares are given direct ownership rights on these shares. The term used to represent the owners of preference shares is “preferred shareholders”. These shareholders are not given voting rights in the general meeting of the corporation. For instance, if a company is planning to announce However, these preference shareholders are given preferential treatment in the distribution of the annual dividends of an organization during or after the completion of the fiscal year. Although, the amount for the dividend remains fixed for them. Therefore, whenever the company generates higher profit stream the increased net income does not benefit them in the form of dividend payment. Similarly, in case of a decrease in the net earnings of the company preference shareholders are given that fixed amount of dividend. Thus, changes in the net earnings do not influence the dividend payment of the preference shareholders. Apart from the dividend policies, the preference share enable their owners to remain safe and ahead from the ordinary shareholders even whenever a business experience troubles and challenges for its profitability in the business (Paramasivan, 2009).

Cumulative Preference Shares: Sometimes companies fail to provide a dividend to their shareholders if company experience decreases in the net income or find insufficient profit available for the distribution. In such a situation, the cumulative preference shareholders are the only shareholders whom the company provide a dividend. However, because of the inevitability of the funds or profit company make a promise for the dividend payment. This is also known as carrying forward dividend for the company. The cumulative preference shareholders are paid the carried forward dividend payments in the successive years. Thus, the main difference that differentiate cumulative preference shares and ordinary shares is related to the distribution of the dividend payments (economictimes.indiatimes.com, 2019).

Redeemable Shares: Redeemable shares are those shares that a company offer with the agreement of repurchase. In other words, sometimes companies sell out some shares with the agreement that at a certain date company would repurchase these shares from the investors. Sometimes, that future date can be a specific or pre-decided date. Somehow, following the rules companies cannot sale all their shares outstanding as redeemable shares. Instead, companies are required to offer a higher percentage of outstanding shares as non-redeemable shares in the public. These kinds of shares are also offered as non-voting shares (Companylawclub.co.uk, 2020). Therefore, owners of these redeemable shares are not allowed to participate in voting during the decision making process. Moreover, in many companies, such kind of shares are only given to the company's employees so that company can easily repurchase these shares at a certain date. Apart, company repurchase or callback these share at the nominal value of shares.

Conclusion of the Types of Shares

The whole discussion concludes that companies offer various kind of shares. These shares can be classified based on the type or time of issuance by the corporation or a listed company in the stock market. The key types of shares offered by the companies are redeemable shares, non-redeemable shares, preference shares, non-voting ordinary shares. All these shares have different requirements for dividend payments. Moreover, change in the voting policies for investors of these shares also creates a difference. Summarizing the whole discussion, ordinary shareholders are given voting rights. While preference shareholders, redeemable shareholders and cumulative preference shareholders are not given voting rights in the decision of dividend declaration by the company.