Stocks and Shares 3: Features of Shares

Now that we've taken up issuance and transfer of stocks, let's look at the shares of stock themselves. There are 7 kinds of shares of stock:

1.) Common

Common shares are equal in rights and privileges and have no fixed/definite ROI. If the corporation issues only one kind of stock, then it's common.

2.) Preferred

Preferred shares, on the other hand, enjoy preferences  on dividends (or assets in case of liquidation.) They also have a fixed or limited ROI.

3.) Redeemable/Callable

Preferred (usually) shares that can be redeemed by the corporation on a fixed date and redemption price, regardless of whether there were unrestricted earnings or not. The corporation won't, however, become insolvent by their redemption because a sinking fund deposited at a trustee bank is always prepared for the purpose.

4.) Treasury

Shares that were issued and fully paid for but bought back by the corporation by purchase, redemption or any other legal means. They're not retired, so they can be sold again (and at a price lower than par value.) They can't be distributed as cash or stock dividends but they can be property dividends.

5.) Convertible

Shares that can be converted from one class to another (preferred to common, or no-par to par) at a certain price and within a certain period.

6.) Shares in Escrow

Shares held in a third party's custody until they're fully paid. The buyer isn't their owner yet, so he doesn't have the rights and privileges of a stockholder.

7.) Founders' Shares

Shares issued to the founders and promoters of the corporation. They can be given certain rights and privileges that the other shares don't enjoy. If the exclusive right to vote and be voted for in the election of directors is granted them, it can't be longer that 5 years after the date of approval by the SEC.