Types of Ordinary Shares

Types of Ordinary Shares

Ordinary shares are issued to the General public, and these shares are entitled to receive dividend declared by the company. Ordinary shares can be classified into three classes in term of issuance. It is to be noted that after issuance of ordinary shares, all types of ordinary shares become ordinary shares.

1.    Initial Ordinary Shares

Ordinary shares are initially issued to General public against public subscription (deposit of funds). The people apply for these shares against initial public offer made by the companies in the newspaper. The people apply through prospectus (document carries application for shares used by companies’ for shares)

2.    Right Shares

Right share are issued to existing shareholder in proportion to shares held by them. The unaccepted or unsubscribed right shares by existing equity holder may be issued to other investors by stock exchange. Right shares become ordinary shares, once these are issued.

3.    Bonus Shares

Bonus shares are issued to existing shareholder in lieu of cash dividend. These shares become ordinary shares once issued.