Shares are the amounts invested in a company by its owners. Owners of a company in this manner will thus be shareholders.
If you wish to purchase shares in a company you are effectively purchasing stock in that company.
What are the categories of shares that are available?
Available shares can be broken down into the following categories:
Ordinary shares are the most common standard company shares as they carry with them no special rights or restrictions.
Preference shares carry a right whereby any annual dividends that are available for distribution will be paid on these shares as a priority to before other types of shares.
Cumulative preference shares carry a right whereby the dividend will be carried forward to successive years if it cannot be paid in an earlier year.
Redeemable shares will be issued with an agreement that the company will buy then back at the option of the company or the shareholder either after a certain period of time or on a fixed date.
A company must have a mixture of the above shares, all with differing conditions attached to them, as it would be impossible for the proper running of the company just to have redeemable shares.
Will the shares that I purchase always be in the same currency?
Different types of shares for the same company may be in different currencies even if the company is formed in England and Wales. A public limited company in England, Wales and Scotland, however, must have at least £50,000 of its issued capital in pounds sterling regardless of whatever other currency it may use.
Do I have to purchase the shares directly from the company?
Shares in a public company for the most part will be transferred though a broker dealing in the market which is appropriate to those shares. There is however, instances whereby you can purchase shares from another individual and the shares will be transferred directly from the seller to the buyer.
How do shares become transferred to new owners?
The way in which shares will be transferred to a new owner depends on whether the company for which the shares are held is a public limited company or a private or unlimited company.
Public limited company
The transfer of shares held in a public limited company will usually be done through a broker.
Private or unlimited company
If shares in a private or unlimited company are to be transferred a stock transfer form must be used. Once the transfer is complete the stock transfer form along with the share certificate must be passed to the new owner.
The new owner of the shares will then pay any stamp duty which is required to the Inland Revenue and provides the completed form and share certificate to the company. The company directors will then authorise the change to the members’ register then issuing a share certificate in the new name.
How much stamp duty is required to be paid for the transfer of shares?
As the transfer of shares is a chargeable transaction under the Stamp Act 1795 stamp duty is required to be paid to the Inland Revenue. The amount to be paid is on the aggregate amount at ½ % rounded up to the nearest multiple of £5.
Can a company re-arrange its shares?
It is possible for a company to change its shares if the change is authorised by the articles of association of the company or by an ordinary resolution.
Can the rights which are attached to shares be changed?
It is possible for a company to alter the rights which are attached to any class of shares; this should be provided for in the memorandum of articles for the company.
However, there is a qualification that the company cannot simply convert non-redeemable shares into redeemable ones.
Is it possible for a company to purchase its own shares?
It is possible for a company to purchase its own shares if this is permitted by the company articles and is done by a special resolution.
A company is not able to do this however, if it would only leave redeemable shares as the only available shares.
If a company buys its own shares does it require a transfer document?
If a company redeems its shares or buys its own shares and then cancels them there is no requirement for any transfer documentation as none of these events will qualify as a transfer of shares.