{"id":2518,"date":"2021-04-02T16:51:00","date_gmt":"2021-04-02T11:21:00","guid":{"rendered":"https:\/\/blog.tickertape.in\/?p=2518"},"modified":"2023-01-02T17:33:13","modified_gmt":"2023-01-02T12:03:13","slug":"types-of-shares","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/types-of-shares\/","title":{"rendered":"What are shares and types of shares"},"content":{"rendered":"\n<p>A company can raise capital in two ways: by borrowing and issuing shares. In this article, we discuss what are shares and the <a href=\"https:\/\/www.tickertape.in\/blog\/shares\/\">types of shares<\/a>.<\/p>\n\n\n\n<p>This article covers:<\/p>\n\n\n\n<ul><li><a href=\"#shares\">What are shares?<\/a><\/li><li><a href=\"#types\">Types of shares<\/a><\/li><li><a href=\"#meaning\">Equity shares meaning<\/a><\/li><li><a href=\"#features\">Types of equity shares based on the features<\/a><\/li><li><a href=\"#returns\">Types of equity shares based on returns<\/a><\/li><li><a href=\"#preference\">Preference shares meaning<\/a><\/li><li><a href=\"#share\">Types of preference shares<\/a><\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#What-are-shares\" title=\"What are shares?\">What are shares?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Types-of-shares\" title=\"Types of shares\">Types of shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Equity-shares-meaning\" title=\"Equity shares meaning\">Equity shares meaning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Types-of-equity-shares-based-on-the-features\" title=\"Types of equity shares based on the features\">Types of equity shares based on the features<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Bonus-shares\" title=\"Bonus shares\">Bonus shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Rights-shares\" title=\"Rights shares\">Rights shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Sweat-equity-shares\" title=\"Sweat equity shares\">Sweat equity shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Voting-shares-and-non-voting-shares\" title=\"Voting shares and non-voting shares\">Voting shares and non-voting shares<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Types-of-equity-shares-based-on-returns\" title=\"Types of equity shares based on returns\">Types of equity shares based on returns<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Dividend-stocks\" title=\"Dividend stocks\">Dividend stocks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Growth-stocks\" title=\"Growth stocks\">Growth stocks<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Value-stocks\" title=\"Value stocks\">Value stocks<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Preference-shares-meaning\" title=\"Preference shares meaning\">Preference shares meaning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Types-of-preference-shares\" title=\"Types of preference shares\">Types of preference shares<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Cumulative-preference-shares-and-non-cumulative-preference-shares\" title=\"Cumulative preference shares and non-cumulative preference shares\">Cumulative preference shares and non-cumulative preference shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Participating-preference-shares-and-non-participating-preference-shares\" title=\"Participating preference shares and non-participating preference shares\">Participating preference shares and non-participating preference shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Convertible-preference-shares-and-non-convertible-preference-shares\" title=\"Convertible preference shares and non-convertible preference shares\">Convertible preference shares and non-convertible preference shares<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/www.tickertape.in\/blog\/types-of-shares\/#Redeemable-preference-shares-and-irredeemable-preference-shares\" title=\"Redeemable preference shares and irredeemable preference shares\">Redeemable preference shares and irredeemable preference shares<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" id=\"shares\"><span class=\"ez-toc-section\" id=\"What-are-shares\"><\/span><strong>What are shares?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When you buy\/hold shares of a company, you become an investor\/shareholder. A share gives you a stake or part ownership in the company, making you a part-owner of the company. Apart from ownership, a share also offers other entitlements to <a href=\"https:\/\/www.tickertape.in\/blog\/shareholders\/\">shareholders<\/a> such as voting rights, preferential rights, participation in surplus profits, rights to receive dividends, and so on. These entitlements or benefits depend on the types of shares in question. Now that you know what a share is, let us look at the various types of shares that a company can issue.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"types\"><span class=\"ez-toc-section\" id=\"Types-of-shares\"><\/span><strong>Types of shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Shares are classified into two broad categories:<\/p>\n\n\n\n<ul><li><a href=\"https:\/\/www.tickertape.in\/blog\/what-is-equity\/\">Equity<\/a> shares<\/li><li><a href=\"https:\/\/www.tickertape.in\/blog\/preference-share\/\">Preference shares<\/a><\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"meaning\"><span class=\"ez-toc-section\" id=\"Equity-shares-meaning\"><\/span><strong>Equity shares meaning<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Also known as <a href=\"https:\/\/www.tickertape.in\/blog\/ordinary-shares\/\">ordinary shares<\/a>, <a href=\"https:\/\/www.tickertape.in\/blog\/what-are-equity-shares-meaning-types-features-limitations-and-more\/\">equity shares<\/a> give ownership rights to shareholders. By virtue of this, you are entitled to receive dividends, which are part of the company\u2019s profits. However, the <a href=\"https:\/\/www.tickertape.in\/blog\/cash-dividend-vs-stock-dividend\/\">dividend<\/a> payment is not guaranteed by a company. This is because the company can only declare dividends to equity shareholders after meeting other obligations out of the profits.<\/p>\n\n\n\n<p>In addition to dividends, you are also entitled to participate in the company\u2019s surplus profits (over and above dividends). The surplus is what remains after the company makes all the payments it was obligated to out of the profits including dividends paid to preference shareholders. Similarly, as a part-owner of the company, you are also required to partake in its losses limited to your stake.<\/p>\n\n\n\n<p>In addition to ownership rights, equity shares also give voting rights to shareholders. Generally, one share denotes one vote but this can differ based on the company\u2019s policies. As an equity shareholder, you can also attend the general and annual meetings of a company and exercise your voting rights during the election of directors and review of company policies.<\/p>\n\n\n\n<p>Equity shares are transferable and are traded actively in a <a href=\"https:\/\/www.tickertape.in\/blog\/how-to-invest-in-shares\/\">stock market<\/a>. You can make money by buying equity shares at a lower price and selling them at an inflated price in a stock market. Now that you are familiar with equity shares meaning, let\u2019s take a look at the types of equity shares.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"features\"><span class=\"ez-toc-section\" id=\"Types-of-equity-shares-based-on-the-features\"><\/span><strong>Types of equity shares based on the features<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li><a href=\"https:\/\/www.tickertape.in\/blog\/bonus-shares\/\">Bonus shares<\/a><\/li><li>Rights shares<\/li><li><a href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/\">Sweat equity shares<\/a><\/li><li>Voting shares and non-voting shares<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Bonus-shares\"><\/span><strong>Bonus shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These are additional shares that a company issues to its existing shareholders free of cost. Bonus shares are issued instead of offering monetary compensation for dividends or to convert some of the company\u2019s retained earnings into equity shares.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Rights-shares\"><\/span><strong>Rights shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Also known as a <a href=\"https:\/\/www.tickertape.in\/blog\/reliance-announces-rights-issue-what-it-means-to-investors\/\">rights issue<\/a>, rights shares give existing equity shareholders a right to buy new shares at a discounted price. In other words, shareholders can either exercise this right and buy new shares or revoke the right and not subscribe at all. Rights shares are available for subscription before they are open for trade to potential investors. Ergo, as an existing shareholder, you are required to buy such equity within the stipulated time. You can read more about the rights issue in <a href=\"https:\/\/www.tickertape.in\/blog\/lt-finance-ltd\/?ref=blog\">this<\/a> article we have written.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sweat-equity-shares\"><\/span><strong>Sweat equity shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These are offered to employees of a company as a reward for their significant contribution or service. Offering sweat equity is a great way to retain efficient employees as it gives them a stake in the company\u2019s ownership. To get a better understanding of this type of equity, read our article on <a href=\"https:\/\/www.tickertape.in\/blog\/sweat-equity-shares-meaning-merits-taxation\/?ref=blog\">sweat equity shares<\/a>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Voting-shares-and-non-voting-shares\"><\/span><strong>Voting shares and non-voting shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In general, most equity shares give voting rights to investors. However, equity shares give differential voting rights or don\u2019t give any voting rights to the shareholders. These are called non-voting shares.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"returns\"><span class=\"ez-toc-section\" id=\"Types-of-equity-shares-based-on-returns\"><\/span><strong>Types of equity shares based on returns<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li><a href=\"https:\/\/www.tickertape.in\/blog\/dividend-investing\/\">Dividend stocks<\/a><\/li><li><a href=\"https:\/\/www.tickertape.in\/blog\/is-it-right-to-pay-a-higher-price-for-a-growth-stock\/\">Growth stocks<\/a>  <\/li><li>Value stocks<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Dividend-stocks\"><\/span><strong>Dividend stocks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These are dividends paid by a company in the form of new shares. <a href=\"https:\/\/www.tickertape.in\/blog\/what-is-dividend\/\">Dividend<\/a> stocks are issued on a pro-rata basis.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Growth-stocks\"><\/span><strong>Growth stocks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These are issued by companies having a high potential for growth. Growth stocks may or may not offer dividends but owning them can help wealth creation via capital appreciation.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Value-stocks\"><\/span><strong>Value stocks<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>These are stocks that trade at a price lower than their <a href=\"https:\/\/www.tickertape.in\/blog\/intrinsic-value-of-shares\/\">intrinsic value<\/a> in the markets. The price of such shares is expected to appreciate gradually, making value stocks attractive investment propositions for investors with a long-term investment horizon.<\/p>\n\n\n\n<p>Now that you are familiar with the various types of equity shares, let us understand what <a href=\"https:\/\/www.tickertape.in\/blog\/difference-between-equity-share-and-preference-share-all-you-need-to-know\/\">preference shares<\/a> are.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"preference\"><span class=\"ez-toc-section\" id=\"Preference-shares-meaning\"><\/span><strong>Preference shares meaning<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Like equity shares, preference shares also offer ownership rights to investors. In addition, they give you preferential rights over other shareholders. For instance, while preferential shareholders are guaranteed a fixed dividend, they are entitled to receive it on priority, before the ordinary shareholders.<\/p>\n\n\n\n<p>Also, in the event of winding up of a company, preference shareholders are entitled to receive their dues before equity shareholders. However, such shareholders can\u2019t partake in a company\u2019s surplus profits. Preference shares also don\u2019t entail voting rights.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"share\"><span class=\"ez-toc-section\" id=\"Types-of-preference-shares\"><\/span><strong>Types of preference shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>Cumulative preference shares and non-cumulative preference shares<\/li><li>Participating preference shares and non-participating preference shares<\/li><li>Convertible preference shares and non-convertible preference shares<\/li><li>Redeemable preference shares and irredeemable preference shares<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cumulative-preference-shares-and-non-cumulative-preference-shares\"><\/span><strong>Cumulative preference shares and non-cumulative preference shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Cumulative preference shares give shareholders the right to receive the arrears of dividend before other investors. Meaning, if a company doesn\u2019t pay dividends to preference shareholders in a given year, it will be carried forward to the next year. In contrast, non-cumulative preference shares don\u2019t enjoy such benefits. If a company makes inadequate profits during a year and fails to pay dividends, then it cannot be recovered in the subsequent years.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Participating-preference-shares-and-non-participating-preference-shares\"><\/span><strong>Participating preference shares and non-participating preference shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Holders of participating preference shares are entitled to partake in the surplus profits of a company after the equity shareholders are paid dividends. This is in addition to guaranteed dividends. On the other hand, holders of non-participating preference shares are only eligible to receive a fixed dividend and cannot partake in the surplus profit.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Convertible-preference-shares-and-non-convertible-preference-shares\"><\/span><strong>Convertible preference shares and non-convertible preference shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Subject to the conditions laid down in the Articles of Association (AoA) of the company, convertible preference shares can be converted into equity shares. However, non-convertible preference shares can\u2019t be converted into equity shares.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Redeemable-preference-shares-and-irredeemable-preference-shares\"><\/span><strong>Redeemable preference shares and irredeemable preference shares<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Redeemable shares can be claimed or repurchased by the issuing company at a fixed price at a later date. In contrast, irredeemable preference shares can\u2019t be repurchased by the company.<\/p>\n\n\n\n<p>We hope this article on various types of shares has made you better equipped to make informed investment decisions.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Issuing shares is one of the ways for a company to raise capital. Read the meaning and types of shares here.<\/p>\n","protected":false},"author":27,"featured_media":2521,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"no","footnotes":""},"categories":[9],"tags":[254,255,230,256,251,44],"acf":[],"modified_by":"Aradhana Gotur","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2021\/04\/Types-of-shares.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2518"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/27"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=2518"}],"version-history":[{"count":4,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2518\/revisions"}],"predecessor-version":[{"id":2557,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/2518\/revisions\/2557"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/2521"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=2518"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=2518"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=2518"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}