Shares are units of ownership that are divided among a corporation's shareholders. The percentage of total shares owned by a shareholder can sometimes demonstrate the percent they own in the corporation. For instance, if a shareholder holds 70 out of 100 available shares in a corporation, the shareholder owns 70% of the corporation.
There are several terms used to describe shares in a corporation: voting, non-voting, common, and preferred shares.
Whether a shareholder owns voting or non-voting shares determines whether or not they are eligible to vote on resolutions at shareholders' meetings. For instance, voting shareholders are able to elect directors to manage the corporation.
The terms common and preferred refer to the class of the shares and deal with the share's value. Shareholders who own preferred shares (as opposed to common shares) are given a priority in terms of receiving a portion of profits (known as dividends). They are also given priority in the event of liquidation (i.e. the process of closing a business and converting assets into money).
Common shares are the most frequently held share class in a company, and a Share Subscription Agreement will generally involve the purchase of common class shares instead of preferred shares. It’s also important to know that most corporations will have common shares, but not all will have preferred.
