Understanding Equity Securities: Shares, Rights, and Obligations
Understanding Equity Securities
Regarding reimbursement, some methods may be more precise than others. Amortized nominal value and premium obligations involve a premium. If significant amounts are involved, obligations batches can be discussed.
Other Liabilities
Obligations can include warrants, granting the holder the right to buy shares or bonds at a specific price and deadline. These can be negotiated on an exchange, representing a right rather than an obligation. Zero-coupon bonds involve interest paid only once at the end of the depreciation period. Participatory obligations offer additional benefits beyond interest or coupons, allowing participation in the company’s profits.
Concept and Characteristics of Equity Securities
Equity securities involve compensating holders with a share of the profits. The stock market represents a significant portion of the equity market. A key feature is the membership aspect, granting certain rights, benefit-sharing in decisions, and the ability to attend and vote in the General Meeting.
Shares
Shares are securities representing a portion of the company’s capital. They are equity securities that provide dividends. Interim dividends are often distributed in advance of the final earnings. Additional dividends may also be issued at the end of the fiscal year. Being a shareholder signifies being a partner or owner of the company, with associated rights and obligations.
Rights and Obligations of Shareholders
Shareholders possess several rights, including:
- Right to participation
- Right to share in liquidation proceeds
- Dividend rights and benefits
- Right to attend and vote at meetings
- Right to preferential subscription
- Right to transfer securities
- Right to information
- Right to separation from the company
Shareholders also have obligations:
- Obligation to pay at the time of subscription
- Responsibility and obligation in proportion to the capital invested
Classes of Shares
Shares can be categorized as:
- Registered and Bearer: Registered shares explicitly indicate the holder’s name, making transmission more difficult to control. Bearer shares implicitly designate the carrier, although registration may be required in certain cases.
- Ordinary and Privileged: Ordinary shares have the standard rights and obligations. Privileged shares have additional rights and obligations recognized in the statutes, such as a place on the board.
- Syndicated Shares: The transmission of these shares is restricted and can be governed by the bylaws or agreements between shareholders.
- Non-Voting Shares: These shares lack voting rights but must have a set of rights, such as receiving at least a 5% annual dividend. They are paid in liquidation before voting shares and, if minimum benefits are not met, can exercise their right of first refusal and the right to information in the following 5 years.
Value of Shares
The value of shares can be determined in several ways:
- Nominal Value: This is reflected in the title and represents a portion of the social capital. All shares issued in the same series should have the same nominal value.
- Emission Value: This is the value at the time of creation. Issuing shares below par value is prohibited by law.
- Cash Value: This value fluctuates based on income and growth expectations and can be expressed as whole numbers or percentages.
- Book Value: Also known as the theoretical value, it is calculated by dividing net worth by the number of shares. It does not account for future profit expectations. Investors invest capital in securities to achieve higher returns than other methods.