Represent ownership in an enterprise. In the event of a bankruptcy the common shareholders are the last to be paid. This payment would be out of any residual value after creditors and other investors are paid.

Shareholders are entitled to a prorata portion of profits. The profits may be paid out as dividends or retained. When retained this internal cash generation may be preferable to issuing new stock for growth or borrowing.

Shareholders have a vote in the corporate affairs. However, some companies have issued different classes of shares. These classes are often distinguished by a difference in voting power. Sometimes one class of stock maybe entitled to only one vote per share whereas another class of stock may be empowered by multiple votes per share. In the later case, this greater voting influence is referred to as super-voting shares.

Super-voting shares are often held by the original founders or current management. Sometimes, the other non-muliple voting shares have a slight advantage in dividend payments or claims.

Stocks can also be issued, depending on location of incorporation, in cumulative or noncumulative voting shares.

Cumulative voting means that you can aggregate your votes for electing a director or choosing a corporate issue. For example, if nine candidates are running for the board of directors you can cast one vote for a candidate - noncumulative - or nine votes for one candidate - cumulative voting rights.

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Copyright © 1998-2019 Barkley International, Inc. All Rights Reserved. - Page created Tuesday, May 19, 1998 by Oasis Management®. Last Modified on Thursday, August 22, 2019.