CG50204 - Definitions: share: different classes of share

There are a variety of reasons why companies issue shares of different classes. Often they are related to the degree of risk the investor is prepared to take or the extent to which those who control the company are prepared to let others participate in the company. For example, redeemable preference shares are very similar in their commercial characteristics to loan finance. The holder of the shares is entitled to a fixed return and can get their money back by redeeming the shares. You may find this type of share is issued to financial institutions as part of a finance raising exercise. Because the shareholder has minimised their exposure to risk their right to participate in the affairs of the company by voting at meetings and sharing in the growth of the company through the payment of ordinary dividends and return of capital will be strictly limited.