The definition of equity is an individual or collectively owned interest in the company, and the shares constitute a percentage of the company’s capital, which is also defined as a type of securities issued by governments or corporations, based on a fixed interest rate.
Other definitions of shares are securities of equal value, used in trade, either directly or through the financial markets, and each share is considered a property right that guarantees the owner a specified share of the company’s capital.
Shares are the most traded shares on the financial market, representing private ownership of companies and a percentage of their financial profits. Each common equity investor has the right to participate in the election of the Company’s Board of Directors, receiving one vote for each share he owns in the company.
Long-term common shares contribute to the operation of capital by increasing the percentage of financial returns on all investments in the company’s business, and the value of returns is often higher than the cost of equity, but some of that is due to some risk, especially if the company is bankrupt and becomes liquidable , and that shareholders receive the value of their share of the capital only after the payment of the debt with the value of the sands and outstanding shares of the owners.
Preferred shares are shares that constitute a percentage of the company’s ownership but do not grant the right to vote to shareholders, and the shares are considered preferred shares with guaranteed and fixed dividends, unlike common shares with variable profits, and when the liquid company the shareholder receives its shares before other shareholders , and some investors view these shares as equity.
Shares that are separate from common shares are divided into a variety of types:
- direct shares (non-cumulative): a type of premium share, but they have no additional benefits, and the shareholder is entitled to the value of the advertised dividends, and if the company is unable to pay dividends, there is no benefit to the investor.
- Cumulative shares: Shares that protect shareholders in the event of financial difficulties or non-payment of dividends, as the value of the shares accumulates on the company until it is able to pay them.
- Shares: They give their owners the right to receive dividends from declared dividends and additional dividends shared. Transferable shares: Shares that offer the advantage of trading shares with common shares at a fixed price called conversion price.
- Recall shares: Shares that benefit the company and not the shareholder, since the company of this type of share has the right to be repurchased at the end of its validity.
The issuance of shares is an issue of shares of private positions in participating companies during their establishment, helping individual shareholders participate in the capital of the institution, or to increase the capital of the company in case of need in the future, and there are many reasons associated with the issuance of shares, the most important of which are:
the increase in the private financial liquidity of the company in order to deal with financial crises or losses. Funding new projects to develop businesses. Participation in the capital of competing companies for strategic or investment reasons.
The rights of shareholders, i.e. the shareholders of the company, have a set of rights guaranteed in accordance with the law, including: to obtain a share of the liquidation value of the company, whether it is dissolved or expires.
Co-management of the company and general and extraordinary meeting of shareholders. The right to participate in board elections by running or voting. A portion of the profits distributed during the year, determined by the General Shareholders Association, will be distributed according to the share of each shareholder. The right to access all important documents and information in order to track the activities and activities of the company.
The characteristics of the shares are characterized by each type of shares with certain characteristics.
the characteristics of the common shares: they are particular characteristics of this type of shares, and are divided into the following elements:
- the remaining claim: that the common shareholders obtain their rights to the income and assets of the company at the end of the liquidation process.
- Limited liability: Most shareholders may lose the value of their stake when a company is unable to invest properly, and if it goes bankrupt, all shareholders can lose their shares in the company, resulting in their loss.
The characteristics of premium shares are specific characteristics of these shares, divided into the following:
Premium dividends are distributed in the same way as ordinary dividends. The shares are similar to those that are good because they pay dividends to shareholders on the basis of a previous agreement, spread over regular periods. Some companies pay premium share issuance rates before maturity. Excellent shares do not give corporate shareholders the right to vote.