‘A’ ordinary shares

3 key takeaways

• ‘A’ ordinary shares can have unique voting rights, dividends, or other privileges.
• They are often used to provide flexibility in ownership and control within a company.
• These shares are a common feature in companies with complex ownership structures.

What are ‘A’ ordinary shares?

‘A’ ordinary shares are a type of equity security issued by a company that typically carry the same basic rights as ordinary shares but with specific variations in voting power, dividend rights, or other privileges. These variations are determined by the company’s articles of association or shareholder agreements and can provide flexibility in managing ownership and control within the company.

For instance, ‘A’ ordinary shares might offer enhanced voting rights, allowing holders more influence over corporate decisions compared to holders of other classes of shares. Alternatively, they might carry preferential dividend rights, ensuring that holders receive dividends before other shareholders.

Differences between ‘A’ ordinary shares and other shares

The key distinctions between ‘A’ ordinary shares and other classes of shares can include:

• Voting rights: ‘A’ ordinary shares may offer more or fewer voting rights per share compared to other classes.
• Dividend rights: These shares might have preferential dividend rights, meaning they receive dividends before other share classes.
• Conversion rights: ‘A’ ordinary shares may be convertible into other classes of shares under certain conditions.
• Liquidation preference: In the event of a company liquidation, ‘A’ ordinary shareholders might have priority over other shareholders for asset distribution.

Benefits of ‘A’ ordinary shares

‘A’ ordinary shares provide several advantages for both the company and its shareholders:

• Flexibility in ownership: Companies can tailor the rights attached to ‘A’ ordinary shares to meet specific strategic needs.
• Enhanced control: Founders or key stakeholders can maintain control of the company through enhanced voting rights.
• Attractive to investors: Preferential dividends or other rights can make ‘A’ ordinary shares more attractive to potential investors.

Examples of ‘A’ ordinary shares usage

‘A’ ordinary shares are commonly used in various scenarios:

• Founders and management: Founders might hold ‘A’ ordinary shares to retain control over the company while raising capital by issuing other classes of shares.
• Family businesses: In family-owned businesses, ‘A’ ordinary shares can be used to maintain control within the family while still allowing outside investment.
• Employee incentives: Companies might issue ‘A’ ordinary shares to key employees as part of incentive programs, providing them with voting rights or dividends that align their interests with the company’s success.

Considerations for investing in ‘A’ ordinary shares

When considering investing in ‘A’ ordinary shares, potential investors should:

• Understand the rights: Carefully review the specific rights and privileges attached to ‘A’ ordinary shares, as outlined in the company’s articles of association or shareholder agreements.
• Assess the benefits: Evaluate whether the enhanced rights, such as voting power or dividend preference, justify the investment.
• Consider the risks: Be aware of any limitations or restrictions associated with ‘A’ ordinary shares, such as limited liquidity or restrictions on transferability.

To further understand different types of shares and their implications, you might want to learn about preference shares, ordinary shares, and the rights of shareholders.