SHARETIPSINFO >> Articles Directory >>Common shares and its significance


Shares appear commonly as common shares in the market. The common share also known as voting shares is a stock that can permit the stock holder to vote on issues concerning the policies of corporate and the board of directors of the corporate. Common stocks are securities which represent an equity ownership for the stock holder. The share holder receives certain rights and he is given a share of the success of the company. The share is given in the form of dividends and capitals.

The preference of the common share holder in case of liquidation is only after the preference of bondholders, debt holders and preferred stock holders. Only after these people are satisfied, common stockholder will be given a chance to enjoy the assets of the company. A stock holder who owns common shares are given a chance of giving his one vote to elect the board of directors of the corporate. At times of company decisions like stock splits and other main objectives of the company as a whole, common shares will receive a hand in voting his rights.

Apart from the voting rights, common share holders also get preemptive rights. This is helpful in times when the company is issuing another stock. In event of such an offering, common shares will give the share holder a chance to maintain his ownership in the company in the proportion of the shares that he holds before. These preemptive rights give them the right to get the new shares of the company, if they introduce any, in a count that is needed to maintain their ownership equally in the company.

When the company is bankrupted, the holders of common shares will receive money only after the preference of the creditors and the preferred share holders. Once they all have received their share of money from the corporation, shareholders owing a common share will receive their proportion of money. This makes it clear that getting common shares is risky. But the main advantage of common shares is that they can excel bonds and the shares hold by preferred share holders in a long run.

Just as preferred stocks, common shares also have their own advantages and disadvantages. These advantages are felt in a long run though it might seem to be disadvantageous in the beginning. This makes users feel that they might secure a common share in the corporation.

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