What is ordinary share capital?


Quick Answer

Ordinary share capital refers to shares that are issued by a company that allow shareholders voting rights within a corporation. Ordinary shareholders may also receive dividends. Ordinary shares are also referred to as common stocks.

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Full Answer

Ordinary shareholders retain the property rights to their shares. These shareholders have a right to receive dividends of the company only after they are paid out to preferred shareholders and bondholders, who are firstly entitled to a predetermined amount of a company's shares. Ordinary shareholders do not receive dividends if there are none remaining after preferred shareholders and bondholders are paid.

Many companies issue ordinary shares only. Companies may divide ordinary shares into categories. This is usually done when the company desires to assign different rules and restrictions, and pay different dividend amounts, to each share class.

Those who hold ordinary shares within a company are given voting rights. Ordinarily, each share entitles the owner to one vote. A company that classes its ordinary shares may impose class-based conditions on the voting rights of shares. These conditions are outlined in company articles and the share's issue terms.

Ordinary shares may be traded privately or publicly. Though they do have a face value, their actual prices are influenced by market trends. Share prices will fluctuate based on the state of the market and that of the individual company.

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