Which are the different classes of shares in a share capital?

Which are the different classes of shares in a share capital?

• A. Ordinary shares, preference shares, convertible shares and redeemable shares
• B. Ordinary shares only
• C. Preference shares only
• D. Debt instruments

Answer: (A)

Different classes of shares reflect different rights attached to ownership in a company. Ordinary shares usually carry voting rights and participate in profits and losses, but they rank behind others in liquidation. Preference shares have priority over ordinary shares for dividends and in winding up, though they often have limited or no voting rights. Convertible shares can be converted into another class of shares, typically ordinary, under predefined conditions. Redeemable shares can be bought back by the company after a set period or on a specific date, at a predetermined price. It’s also important to note that debt instruments are not shares at all; they are loans to the company with fixed returns and no ownership rights.

Different classes of shares reflect different rights attached to ownership in a company. Ordinary shares usually carry voting rights and participate in profits and losses, but they rank behind others in liquidation. Preference shares have priority over ordinary shares for dividends and in winding up, though they often have limited or no voting rights. Convertible shares can be converted into another class of shares, typically ordinary, under predefined conditions. Redeemable shares can be bought back by the company after a set period or on a specific date, at a predetermined price. It’s also important to note that debt instruments are not shares at all; they are loans to the company with fixed returns and no ownership rights.