Joint Ventures And Consortia Projects
as a shareholder depend on the type of shares you own. Generally we have assumed throughout this website that you own ordinary voting shares, but there are many other types.
Ordinary voting shares entitle you to receive dividends and to vote according to the size of your shareholding. Ordinary shares are sometimes called 'equities'and ordinary share capital is sometimes called 'equity'or 'equity capital'.
Sometimes shares are called 'A'or 'B'shares. These are shares with different voting arrangements. Usually 'A'shares have no votes at all, but this is not always so.
Loan stock takes many forms, most of which can be traded just like shares, but which have a quite different legal status. Holders of loan stock do not own the company, they have simply lent money to the company.
The commonest form of loan stock is the debenture. This will be indicated with a percentage, e.g. '8% debenture'. This means that the holder receives a fixed return (in this case 8% ) regardless of the profits of the company. If he has £1100 in 8% debentures, he will receives £18 a year regardless of what profits have been made.
Debentures sometimes appear with a date, e.g. '8% debenture 2000/2002'. This means that the debenture is redeemable, i.e. in 2000/2002 the company can redeem the share by repaying the sum you originally lent. Sometimes the company must redeem the debentures then, sometimes it may redeem them. Sometimes only some debentures are redeemed. This is usually done by lot, and the redeemed debenture numbers are printed, like bingo numbers, in advertisements in the financial press.
Debentures are issued according to a deed. This sets out the debenture holders'rights; which usually include the provision to appoint a receiver if the debenture holders'rights are put in jeopardy.
Preference shares are a hybrid between the ordinary share and debenture. They are similar to debentures in that they carry an interest rate, but differ in the rights given to the holders. The interest on preference shares, like debentures, must be paid out of profits before the ordinary shareholders are paid.
Preference shares can variously be described as 'cumulative', 'participating'and 'convertible'.
'Cumulative'means that if the dividend (at the fixed rate) is not paid one year because the profits are too low, it is rolled over and becomes payable when the profits are sufficient. If the preference share is non-cumulative, unpaid dividends are lost for good.
'Participating'means that, in addition to receiving your fixed interest return, you can also participate in the profits of the company by a dividend in a way similar to ordinary shareholders.
Sometimes they are called 'convertible'. This means they may be converted to ordinary shares. This can be at the company's discretion or the preference shareholder's discretion or at neither's discretion. It can be at a fixed date, or at no fixed date, or within a specified period. It all depends on the terms of their issue.
Conversion of preference shares obviously increases the number of ordinary shares and therefore reduces the earning per (ordinary) share (eps). This is known as 'dilution'. Sometimes the eps and other figures are calculated according to the number of ordinary shares that would be in existence if all the convertible preference shares wer
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