Types of Share Meaning Characteristics Advantages Disadvantages Who/What

Institutions Issued
1. Ordinary Share *Also called Common *NO MATURITY *It has the right to *Due to volatility in *Bank of the
Shares .Defined as *RESIDUAL CLAIM ON vote. share prices, the Philippine Islands
shares of a company INCOME AND ASSETS *Greater rewards, if a prices of ordinary (BPI)
that give *VOTING RIGHTS company makes a shareholders can lose *Philippine Long
shareholders the AND CONTROL large profit. money. Distance and
right to vote in the *PRE-EMPTIVE RIGHT *This helps the *No dividend payable Telephone Company
company’s meeting *LIMITED LIABILITY company to expand during or at the end (PLDT)
and also an income in without increasing of the year. *Metropolitan Bank
the form of dividends too much debt. *Issuing of new & Trust (Metrobank)
from the corporation shares may result in *Ayala Corporation.
profits. diluting the shares
held by the existing
shareholders.
*Ordinary
shareholders receive
the residual amount
left after paying
creditors.
*Take on greater
financial risk.
2a. Convertible Pref. *Preferred shares *Do not carry voting *Get more dividends *Dividend yield on *CORPORATIONS
Share that include an option rights *Enables capital this class is lesser *OWNERS OR
for the holder to *Do not participate appreciation. than other classes of DIRECTORS
convert the shares and nor have any say *Less risk and gets preferred stock. *INVESTMENT
into a fixed number in routine company priority *issue of such shares TRUSTS
of common shares management *Raise capital for results in the dilution *DOMESTIC OR
after a decisions companies. of control after FOREIGN
predetermined date. *Get priority for the *Minimize costs for conversion. GOVERNMENTS
*One-time dividends companies. *Same risk after the
conversion and *Allows holders to *Company's conversion
cannot be reversed convert it into obligation will be *Lose the benefits
*Exchanged at the common shares in forfeited upon that preferred stocks
 request of the the future. conversion. have
shareholder but
sometimes there is a
provision that allows
the company, or
issuer to force the
conversion.
b. Non- Convertible *These type of * Priority over *Shareholders will *Shareholders of *Corporations
Pref. Share preference shares common stock receive their claim to these shares do not *Banks and Other
cannot be converted holders to claim the the assets before the hold the right to Investment Firms
into equity shares. company’s assets common convert to the *Any Public or Private
These shares will only upon liquidation. shareholders do. issuer’s common Limited Company
get fixed dividend *Priority in dividend *Dividends earned on shares. Foreign Investment
payout and also enjoy payments over the these shares are *Holders of such class
preferential dividend holders of the significantly higher of shares do not
payout during the common stock. than ordinary shares. have the right to
dissolution of a *Payments can be *No dilution in obtain equity shares
company. fixed or floating, control on their maturity.
based on an interest *No legal obligation *Investors in these
rate benchmark. for dividend payment vehicles don’t enjoy
*The shares do not the same voting
assign voting rights to rights as common
their holders. shareholders.
* They can receive *Shareholders enjoy
the benefits of similar situations to
growth of the that of an equity
company. holder.
*Hybrid security: the
share partakes the
characteristics of
both the shares and
the bonds.
c. Redeemable Pref. *Redeemable *Provide a third party *Option to *Share redemption is *Redeemable shares
Share Preferences shares investor (eg a venture Repurchase or only allowed at a time may be issued by the
are those type of capitalist) with an Redeem Shares Predetermined upon corporation when
preference agreed exit strategy. *Increases Earnings its issuance. expressly provided in
shares issued to *To provide a method Per Share (EPS) of *Share redemption is the articles of
shareholders which for the company to the Company only a sound option incorporation.
have a callable option buy out certain *Increases Share when the call price of
embedded, meaning shareholders. Value for Existing the shares is lower
they can be Shareholders than the market
redeemed later by price. If not, the
the company. company would be
better off
repurchasing the
shares.
d. Irredeemable Pref. *Irredeemable *Do not have any *They do not have *Although there is no *Corporations
Share preference shares are maturity date. any voting rights. legal obligation of a *Financial Institutions
those preference *Prioritized to receive *There is no legal company to pay *Closed-End
shares that cannot be fixed rate of income obligation to pay dividend on Company
bought back by the (dividends) and dividend on preference shares,
issuing company till capital during preference shares. but frequent delays
the company is a liquidation. *Earns a fixed rate of or non-payment
going concern and in *Do not have voting dividend at adversely affect the
existence. rights. perpetuity. creditworthiness of
-They are treated as *Can only be *Provides the firm.
Equity. extinguished at the preferential rights in *In some cases,
time of liquidation. regard to payment of preference shares
*Dividend payments dividends and carry even the voting
continue for repayment of capital right and hence the
perpetuity as the at the time of control and
shares also exist for liquidation of the management of the
perpetuity. company. company may be
*Do not give the diluted.
issuing company any *These shares
option to buy back become a permanent
 the shares. liability for the issuing
* Offer limited company, in that they
benefits to both the are obligated to pay
issuing company and dividend on these
shareholders. In fact, shares for perpetuity.
several jurisdictions * Do not have any
now prohibit or voting rights.
restrict the right of *The rate of dividend
companies to issue on preference shares
irredeemable is usually lower as
preference shares. comported to the
equity shares.
e. Participating Pref. A type of preference *Receives stipulated *Receives not only *The dividend *CORPORATIONS
Share share that has an dividend and also required dividend, fluctuates depending *Investment trusts
additional benefit participates in the but also may receive on various condition
of participating in the additional earnings of additional dividends *This type of stock is
company’s profits the company along a method to get a rarely issued
apart from the fixed with the ordinary higher valuation for
dividend. The shareholder. the companies.
distribution may *May have a voting can also choose
depend on the terms rights/authority over between two
and conditions certain decisions preferences: the
mentioned in the pertaining to the sale optional conversion
agreement. of business preference or the
venture/crucial liquidation
assets. Limited voting preference
rights mentioned
* Can choose to *The shareholders
convert their shares enjoy duoble-dipping
into common stock. into the proceeds
*Receive liquidation pool
preference and will
be paid out after
creditors but before
 common
stockholders. If there
are leftover capital
they will be treated
as if their shares are
common shares and
split the remaining
profit with the
common
stockholders on the
basis of ownership.
f. Non-Participating One which is dividend *It has a feature that *These shares are *In exchange for the *San Miguel
Pref. Share is paid, usually at a limits the dividends less risky than reduced level of risk, Corporation
fixed rate, and not that can be issued common stock, since owners of
determined by a annually. holders will still earn nonparticipating
company’s earnings. *Holders of this type a return even when shares do not
of share do not the issuing business participate in the
participate in the does not earn a earnings of the issuer,
distribution of profits profit. which caps their
to equity investors. *This dividend is paid maximum return.
*If the Article of before common *Elimination of a
Association is silent, shareholders are participation right
then the Preferred paid a dividend limits the price that
Stocks are presumed *Entitles the holder an investor can
to be non - to the GREATER OF its obtain by selling
participating. investment these shares to a
amount back (plus an third party
accrued dividend, if *It has a fixed rate of
applicable) OR its pro dividends.
rata “common *Shareholders cannot
upside” in the enjoy the benefits of
company. share in the
company’s surplus
profits.
 *Limitations up to a
maximum amount for
each year in
dividends.
g. Cumulative Pref. Cumulative preferred *Fixed dividend *provides investors *The dividend rates *Corporations
Share stock is a type of -Do not hold any with security, and remain stagnant *Banks and other
preferred stock with a voting rights their investment is in these types of financial institutions
provision that *Entitled less likely to suffer stocks, i.e., they *JFC
stipulates that if any to receive payment volatility in the longer will receive the same
dividend payments for missed dividends term. dividend rate
have been missed in prior to any dividends *Comparatively irrespective of the
the past, the being paid to secured investment. business profitability.
dividends owed must common Since they do not lose *They are just named
be paid out to shareholders. the dividend on as
cumulative preferred *Cumulative account of poor shareholders but do
shareholders first. preference shares do performance by the not have a share in
not have a maturity company in a profits in a true
date and can particular year, the sense.
continue in investors are more *At the time of its
perpetuity. assured of their issuance, the
-Have a higher returns. dividend rates are
priority over common *Since these more than the
shareholders in being instruments allow current prevailing
paid off when the dividends to interest rates to
company's assets are cumulate, the rate win investors’
liquidated. offered to them vis-à- preference over debt
*Has option to vis their Non- investments. In a
convert the preferred Cumulative rising interest rate
shares to common counterparts is much situation, the
shares after the lesser. Hence these investment in these
company goes public. instruments help stocks loses charm.
It gives an investor companies to bring On the
the ability to down their cost contrary, if the
maintain a certain of equity. interest rates fall,
percentage of *The management they become a good
ownership in the achieves the investment.
company as more benefit of the *These types of
shares are issued. flexibility of dividend stocks are
payment and subordinate to bonds,
financial leverage, and hence in case of
which results in the insolvency, they get a
wealth maximization ranking after
of its equity bondholders.
shareholder *Most of these stocks
have a call feature,
though with some call
protection, which is a
significant risk if the
interest rate falls in a
medium to a long-
term time frame.
*Dividends are fixed
obligations like
interest on the debt.
The only difference
between a debt
obligation and
preferred stock is that
the company can
delay the payment of
the preference
dividend, but it
cannot delay interest
payments.
* Costly source of
finance in comparison
to debt.
h. Non-Cumulative Companies are not *They are issued with *Its non-payment *One of the costliest *Landbank
pref. Share obligated to pay the pre-determined doesn’t amount to sources of funds. *BDO
stockholders any dividend bankruptcy. *Although the issuing
unpaid or omitted rates, either as a *These shares are company doesn’t face
dividends. percentage of the considered part of any legal
face value or in terms tangible net worth implications due to
of dollar per share. and as such it helps in the non-payment of
*These shareholders improving the capital dividends, it
are paid their structure ratio (e.g. may dent the
dividends before debt-to-equity ratio) investor’s confidence
making the dividend and in the process and impact the
payments to the enhances the company’s image.
common company’s borrowing *Although the risks of
shareholders. capacity. the non-cumulative
*The unpaid shareholders
dividends of these are quite similar to
stockholders are not that of equity
carried forward to shareholders, but still
future years. their pay-out is
*The issuing limited, unlike the
companies can equity shareholders.
resume making the
dividend payments at
any time without any
regard to the unpaid
dividends.
3. Deferred Shares - A deferred share is a *dividends are only *Used as method for *Deferred shares may *According to
share that does not paid after a certain compensation to be issued as part of Companies Act 1956,
have any rights to the date or event or paid executives and an employee benefit no public limited
assets of the after all other classes founders of the package, but there is company or which is
company, undergoing of shares have been company and as a potential for abuse a subsidiary of a
bankruptcy until all paid. means to induce an because the company public company can
common and * in the event of investors in the may issue ordinary issue deferred shares.
preferred insolvency, do not company and deferred shares. *However an
 shareholders are give their holders any *The value of the independent private
paid. rights until all other deferred shares company is still
shareholders are paid would be much less entitled to issue
than the value of the deferred shares.
*Shares that are not
ordinary shares.
tradable until a
certain date -such
shares are usually *Being the last
issued to employees claimants of the
in order to give them profits, they have a
a long term interest considerable element
in the company and of speculation or
to increase their uncertainty and they
loyalty. have to bear the
greatest risk of loss.

4. No Par Share Shares that have *Prices are *The holder of such *Its creditors cannot *Any corporations
been issued without a determined by the shares shall not be sue shareholders for
par value listed on amount that liable to the the difference
the face of the stock investors are willing corporation or to its between the
certificate. to pay for the stocks creditors in respect purchase price and
on the open market. thereto. the par value to
*Gives a company the *Allows to avoid recoup the unpaid
flexibility to set confusion over the debt.
higher future stock par value and the
prices. market value of a
*Stock without par share.
value which is
preferred as to
dividends, or as to its
distributive share of
the assets of the
corporation upon
dissolution, may be
 made subject to
redemption at such
times and prices as
may be determined in
such articles of
incorporation, or any
amendment thereto.
*Any and all shares
without par value
issued shall be
deemed fully paid
and non-assessable
and the holder of
such shares shall not
be liable to the
corporation or to its
creditors in respect
thereto.
*Provide that shares
of stock of any class
shall be convertible
into shares of stock.
2. Convertible Pref. Share
CONVERSION RATIO- The number of equity shares that a preference shareholders will get
CONVERSION PRICE- The price at which converting to common shares gets profitable for the preference shareholder.
CONVERSION PREMIUM- It is the difference between the value of convertible preference shares and the par value of common shares.

3. Redeemable Pref. Share

Maturity Date Shares - A share may carry a maturity date when the company is obligated to redeem the shares. The company pays the shareholders the original value of the
shares (the par value) on that fixed date and the share then ceases to exist.
Call Date Shares - Another type of redeemable shares may carry a call date. The company is allowed to exchange those shares for cash on or after the call date. However, they
are not obligated to do so.
4. Non-participating cumulative pref. share- These shares entitle the holders only to the extent of the stipulated dividend
Participating cumulative pref. share- These shares entitle the holders to participate with the holders of ordinary shares pro-rata in the remainder after the ordinary
shareholders have received their initial share based on the preference rate.

6. Deferred shares are issued by the company undergoing restructuring process.