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A share is usually understood as a security issued by Joint-Stock Company upon its creation (establishment), upon transformation of an enterprise or organization into a joint-stock company, upon merger (acquisition) of two or more joint-stock companies, as well as for the mobilization Money when increasing the existing authorized capital. Therefore, a share can be considered a certificate of making a certain share in the authorized capital of a joint-stock company. The Law "On the Securities Market" defines shares as follows: "A share is an issuance security that secures the rights of its holder (shareholder) to receive part of the profit of a joint-stock company in the form of dividends, to participate in management and to part of the property remaining after its liquidation ".
Holders (shareholders) can be divided into:
Physical (private, individual);
Collective (institutional);
Corporate.
If in the 1960s and 1970s the main share of investors abroad were private investors, then by the 1990s their share had significantly decreased. For example, in the UK in the 60s, the share of private investors owning shares in joint-stock companies was about 70%, and by the 90s it had dropped to 20%. This is explained by the fact that a private investor, having a small block of shares, cannot significantly influence the policy of the company, therefore he expresses his disagreement with the state of affairs in the joint-stock company by selling his shares.
An institutional investor, on the other hand, can play an active role in the management of a joint-stock company, as it can own a large block of shares. In foreign practice, the most influential collective investors are Insurance companies, private pension funds, mutual funds (mutual investment funds).
In Russia, it is still difficult to determine (due to the lack of statistical data) the predominant group of investors. It can be assumed that so far the bulk are individual investors who received shares during the privatization of state-owned enterprises.
The following provisions apply to the issue of the issuer's shares:
A joint-stock company is not obliged to return to investors their capital invested in the purchase of shares. Their purchase of shares is considered as long-term financing of the issuer's costs by the shareholders. Although the Law provides for cases when shareholders-owners of voting shares have the right to demand that the company buy out all or part of their shares. For example, if they voted against a decision to reorganize a joint-stock company, against a major transaction, or did not take part in the voting, but these decisions were made.
The payment of dividends is not guaranteed.
The amount of dividends can be set arbitrarily regardless of profit. Even if there is a net profit, a joint-stock company can direct all profits to the development of production and not pay dividends.
Having received funds through the placement of issued shares, the issuer has the opportunity to use them to form production and non-production fixed and working capital.
Investors in stocks are attracted to the following:
2. The right to income, i.e. to receive part of the net profit of the joint-stock company in the form of dividends.
3. Capital gain associated with a possible increase in the price of shares in the market. As such, this is the main motive for buying shares, especially in Russia at the present time.
4. Additional benefits that a joint-stock company can provide to its shareholders. They take the form of discounts when purchasing products manufactured by a joint-stock company or using services (preferential travel, reduced prices for hotel stays, etc.).
5. Right of first refusal to acquire new share issues.
6. The right to a part of the property of a joint-stock company remaining after its liquidation and settlements with all other creditors.
Shares have the following properties:
A share is a title of ownership, i.e. the shareholder is a co-owner of a joint-stock company with the rights arising from this;
it does not have an expiration date, i.e. the rights of the shareholder are preserved as long as the joint-stock company exists;
it is characterized by limited liability, since the shareholder is not liable for the obligations of the joint-stock company. Therefore, in case of bankruptcy, the investor will not lose Furthermore that invested in the stock;
the share is characterized by indivisibility, i.e. joint ownership of shares is not associated with the division of rights between the owners, all of them together act as one person;
shares can be split and consolidated. When splitting, one share turns into several. The issuer can use this property of shares to reduce the offer of shares of this type. When splitting, the amount of the authorized capital does not change.
At a nominal value of 1000 rubles. 4 new shares are issued, so the par value of new shares becomes equal to 250 rubles. Old certificates are withdrawn from shareholders and new ones are issued, which indicate that they own a large number of shares.
Consolidation reduces the number of shares, which can lead to an increase in their market price. But the minimum cost increases, and the size of the authorized capital remains the same. Shareholders also receive new certificates to replace those withdrawn, which will indicate a smaller number of new shares.
A share is a formal document, therefore, according to the definition of a security, it must have mandatory details.
According to existing regulatory documents, share forms must contain the following details:
1) company name of the joint-stock company and its location;
2) the name of the security - "share";
3) its serial number;
4) release date;
5) type of share (simple or preferred);
6) nominal value;
7) name of the holder;
8) the size of the authorized fund on the day of the issue of shares;
9) the number of issued shares;
10) dividend payment term and dividend rate for preference shares only;
11) signature of the chairman of the board of the joint-stock company;
12) place of printing, enterprise-manufacturer of forms of securities.
In addition, it is possible to indicate the registrar and its location and the agent bank paying dividends.
A share may be issued both in a documentary (paper, tangible) form, and in a non-documentary form - in the form of appropriate entries on the accounts. With a documentary form of share issue, it is possible to replace a share with a certificate, which is evidence of the ownership of a certain number of shares by the person named in it. Upon full payment of the shares, the shareholder receives one certificate for the entire number of shares acquired by him. The share certificate must contain the same details that are characteristic of the share, as well as an indication of the number of shares that belong to the owner (shareholder). In some normative documents a share certificate is classified as a security, although this statement is rather controversial and may complicate the circulation of securities, leading to the simultaneous circulation of both shares and their certificates.
A closed joint stock company (CJSC) is a JSC whose shares are distributed only among its founders or another predetermined group of people. A closed joint stock company is not entitled to conduct an open subscription for shares issued by it or otherwise offer them for purchase to an unlimited number of persons.
The number of shareholders of a CJSC must not exceed 50. If the number of shareholders of a closed company exceeds 50, the said company must be transformed into an open company within one year. If the number of its shareholders is not reduced to 50 people, the company is subject to liquidation in court.
Shareholders of a CJSC enjoy the pre-emptive right to acquire shares sold by other shareholders of this JSC at the offer price to a third party in proportion to the number of shares owned by each of them, unless the charter of the JSC provides for a different procedure for exercising this right. The charter of a CJSC may provide for a JSC's pre-emptive right to acquire shares sold to its shareholders if the shareholders have not exercised their pre-emptive right to acquire shares.
The minimum authorized capital of a CJSC must be at least 100 minimum wages established by federal law as of the date state registration society.
2. Reflection in the charter of a joint-stock company
Placed shares - shares already acquired by shareholders. Declared shares - shares that a JSC may issue in addition to those previously placed. Their total number is specified in the charter of the joint-stock company.
3. Scope of rights granted by a share
Ordinary shares
The owner of an ordinary share has the rights granted by the shares in full (to participate in the general meeting of shareholders with the right to vote on all issues within its competence, to have the right to receive dividends, and in the event of liquidation of the joint-stock company - the right to receive part of its property in the amount of the value of shares).
The conversion of ordinary shares into preferred shares, bonds and other securities is not allowed.
Preferred shares (PA)
The privilege of the owner of the PA is that the charter for the PA of each type must determine the amount of the dividend and (or) the value paid upon liquidation of the JSC (liquidation value). They are determined in a fixed amount of money or as a percentage of the par value of preferred shares.
Preferred shares can have several varieties, and there are no legal restrictions on the number of types of PA. At the same time, the main thing is that the charter of a joint-stock company clearly defines the rights for each type of PA, and their total number does not exceed 25% of the authorized capital.
The holders of preferred shares, for which the amount of the dividend has not been determined, are entitled to receive dividends on an equal basis with the holders of ordinary shares.
If the charter of a JSC provides for preference shares of two or more types, each of which determines the amount of the dividend, the charter of the JSC must also establish the order of payment of dividends for each of them, and if the charter of the JSC provides for two or more types of PA, each of which has a liquidation cost, - the sequence of payment of the liquidation value for each of them.
In exchange for a privilege (a fixed amount of dividend and (or) liquidation value), shareholders - owners of preferred shares do not have the right to vote at the general meeting of shareholders, except for making decisions:
On the reorganization and liquidation of joint-stock companies;
On introducing amendments and additions to the charter of a joint-stock company, which restricts the rights of PA owners;
Full or partial non-payment of dividends on PA with a fixed dividend amount for annual meeting shareholders. The right to vote is lost from the moment of the first payment of dividends on these shares in full.
There are two types of preferred shares in Russia:
1) cumulative - shares on which the unpaid or not fully paid dividend, the amount of which is determined by the charter, is accumulated and paid out no later than the period specified by the charter. If the charter of the joint-stock company does not establish such a period, preference shares are not cumulative.
2) convertible - shares that can be convertible (exchanged) for ordinary shares or preferred shares of other types at the request of shareholders - their owners within the period specified by the charter of the joint-stock company. In this case, the charter must determine the procedure and conditions for their conversion, including the number, categories (type) of shares into which they are converted, etc. The conversion of preferred shares into ordinary shares and preferred shares of other types is allowed only if this is provided for by the charter of the company, as well as during the reorganization of the JSC. The conversion of preference shares into bonds and other securities, with the exception of shares, is not allowed.
One of the features of the issue of shares is that they can be paid dividend. Accrual and payment of dividends is carried out in the manner prescribed by Chapter V of the Law on Joint Stock Companies.
A dividend is a portion of profits paid to shareholders after all other financial obligations have been met and reserves have been replenished to finance the current operations of the organization. Dividends are thus reduced if the organization directs a significant part of its profits to expand production or worsens its financial performance.
Among the features of the activities of joint stock companies should include the fact that the ownership and management of the organization are separated. The company is owned by the shareholders, who appoint a board of directors to manage it on their behalf.
Private investors traditionally buy shares for the purpose of long-term investment and therefore, as a rule, agree to a low dividend for the year if they see the prospect of capital gains as a result of the development of a joint-stock company.
Currently, the main shareholders are institutional investors (pension funds, insurance companies, banks, mutual funds and investment companies). The managers of these organizations administer large sums of money on behalf of a large number of individuals who, by participating in mutual funds or pension funds, are indirect investors.
The initial transfer of cash from investors to issuers in the issuance of shares takes place in the primary market. Since the shares are not redeemed, the organization actually receives cash in perpetuity. When a company's shares are sold on the stock exchange, capital is said to be mobilized on the open or public market, so new issues of this kind are called Initial Public Offerings (IPOs). In order to place your shares on open market, the organization must meet certain financial criteria.
However, the main volume of exchange transactions is not made on the market of new issues, i.e. primary market, but on the secondary market, where shares are traded after their initial placement.
Trading on stock exchanges is determined by the supply and demand of equilibrium prices for the shares of an individual company, which are influenced by the current and expected financial characteristics of the joint-stock company. The dynamics of the stock market as a whole is determined by many events in the world and national markets, including inflation, interest rates, GDP growth, etc.
To solve the problems they face, organizations have to raise funds for various periods. The source of funds may be the profits of the organization or proceeds from the issuance of short-, medium- and long-term financial instruments, such as bonds.
Bond - an issuance security that secures the right of its owner to receive from the issuer a bond within the period specified in it of its nominal value or other property equivalent. A bond may also provide for the right of its owner to receive a fixed percentage of the nominal value of the bond (coupon) or other property rights. The yield on a bond is interest and/or discount. The classification of bonds is presented in Table. 4.1.
Table 4.1
Classification of bonds in Russian and international practice
| Classification sign | Bonds |
| 1. Type of issuer | State: federal; subfederal. Municipal Corporate |
| 2. Bond term | Urgent: short-term; medium-term; long-term. No fixed maturity |
| 3. Order of ownership | Registered Bearer |
| 4. Release form | Documentary Non-documentary |
| 5. Purposes of the bond issue | Conventional Target |
| 6. Nature of treatment | Non-convertible Convertible |
| 7. Loan security | Secured bonds. Bonds secured by collateral (real estate, securities). Bonds secured by a guarantee. Bonds secured by a bank guarantee. Bonds secured by a state or municipal guarantee. Bonds not secured by collateral (without collateral). In accordance with the law, “in the absence of collateral provided by third parties, the issue of bonds is allowed no earlier than the third year of the existence of the company and subject to the proper approval of the annual financial statements for the two completed financial years” |
| 8. Payments made by the issuer on a bonded loan | Bonds placed at a discount (at a discount) and redeemable at face value (coupons are not provided). Bonds on which coupons are not paid until the bond is redeemed, and upon redemption, the investor receives the bond's face value and the total coupon income. Bonds for which the face value is returned, and the payment of interest is not guaranteed and is directly dependent on the performance of the issuer. Bonds that entitle their holders to receive a fixed income paid periodically and the face value of the bond when it is redeemed. Bonds for which the face value is paid in installments simultaneously with a periodically paid coupon |
Bonds are issued in the form of a capital loan, and the buyer of the bond acts as a creditor. The procedure for issuing corporate bonds is regulated by the Law on Joint Stock Companies.
Organizations must maintain a certain balance between debt and equity, not exceeding, on the one hand, the permissible level of borrowing, and on the other hand, avoiding dilution of equity capital as a result of excessive issuance of shares.
Investors lend their money to those who have a need for capital, with the expectation that the money will be returned along with a reward for their use. The amount of remuneration is closely related to the level of risk in the capital market.
It is believed that investing in shares, i.e. entering into fractional ownership of an organization that may not be profitable is more risky than investing in bonds (debt instruments). That is why the owners of shares are counting on their higher profitability, which is made up of the growth in the value of shares and the dividends paid on them. However, dividends are sometimes less than expected, or even not paid at all; It happens that the value of shares also falls. In the worst case scenario, when the organization goes bankrupt, the investor may completely lose his initial investment.
Investors enter the debt market in search of firmer guarantees or more predictable payouts. They lend to the issuer in the belief that it will not cease to exist before the maturity of the bond and will fulfill its debt obligations. In addition, in the event of liquidation of a joint-stock company, in accordance with the law, debt obligations are subject to repayment before settlements with shareholders. In exchange for such guarantees, investors are willing to accept lower returns than they could get from riskier stock investments.
Subject economic relations organized on the basis of a voluntary agreement of several persons or organizations.
The capital of JSC is formed by issuing and selling issued shares. The founding purpose of the corporation is to maintain economic activity, which is aimed at obtaining maximum profit in the interests of shareholders.
AO is legal entity, the capital of which is the contributions of shareholders-shareholders and founders. Shareholders are not liable for the obligations of the joint-stock company, due to which their possible losses are limited only by the value of previously acquired securities.
The founders of the corporation are responsible for the performance of the company in the amount of the share contribution made to the statutory fund. The main governing body is the general meeting of shareholders. Organizational structure AO is complex, but membership, regardless of share, is reliable.
The share is a financial document that confirms the share of the shareholder in the authorized capital of the company and gives him the right to:
- receiving part of the profit (dividend);
- participation in the management of the enterprise;
- receiving a property share if the organization is declared bankrupt or liquidated.
Joint-stock companies are represented by two main types.
- Open Joint Stock Companies (OJSC).
- Closed Joint Stock Companies (CJSC).
Such structures can function in any field of activity: industrial, commercial, intermediary, banking, insurance, etc.
Shares of joint-stock companies
According to the form of appropriation of income, shares of joint-stock companies can be divided into two types:
- simple;
- privileged.
In the first case, the holders of securities have:
- the right to vote during general shareholder meetings (one vote = one share. The more securities a shareholder owns, the more weighty his vote during meetings);
- the right to receive dividends (part of the profit) in the amount equivalent, the amount of which depends on the result of the corporation's work and is no longer guaranteed by anything.
Joint-stock companies can independently manage their capital due to the fact that shareholders do not have the right to demand from the company the return of the deposited amount of money. If the company does not pay dividends or instead of cash, the owners of the securities receive new shares, the shareholders cannot recover the money in court or declare the company bankrupt. Each of the shareholders is a co-owner of the JSC's capital. Each of them volunteered to be responsible for possible risks that are associated with the losses of the enterprise or its bankruptcy. By decision of the meeting of shareholders, the corporation has the right to distribute only part of the profit, leaving the undistributed share at its disposal.
Holders of preferred shares cannot vote during shareholder meetings, but this type of securities gives them the right to receive guaranteed income, regardless of what results the company has achieved as a result of work. In the event of the bankruptcy of the company, the holders of preferred shares receive the right of priority payment of the par value of the securities.
Joint-stock companies maintain an accounting book (register) in which data on holders of registered shares are recorded without fail. Registration is required not only for the first receipt, but also for the subsequent resale of securities. This allows you to create a kind of insurance against buying up a controlling stake (more than 51% of all issued shares) by people whose financial investments are of dubious origin. Bearer shares are allowed for free circulation on the stock market. When creating a JSC, the founders conclude an agreement in which they are prescribed.
What is a joint stock company? Without an answer to this question, it is impossible to talk about investing in securities. This article is an introduction to a story about securities - stocks and bonds. And although there are practically no joint-stock companies, it is impossible to talk about investing in shares without understanding the meaning and principle of organizing joint-stock companies. Therefore, this article does not contradict the topic of the site. Moreover, the dream of many small business owners is its growth, development, and information about the joint-stock company will not harm them.
Introduction.
To continue talking about joint-stock companies, we need some definitions and formulations. Therefore, we will start with them.
security paper- this is an official document certifying the property rights of the owner of this document to the property or funds indicated in it. From an economic point of view, a security is a carrier of capital. The issue of securities (called an issue) is usually considered as a tool to attract financial resources. The issuer of a security may be the state, authorities, legal entities and individuals.
Dividends- is the share of the net income of any business received by an individual or legal entity, in the distribution of profits of this business, remaining after tax. In principle, any kind of profit received from various sources can be attributed to dividends.
Well, now let's proceed directly to the topic of this article.
Joint stock company - what is it?
A joint-stock company (JSC) is a company (business, company), whose capital is divided into a certain number of shares, expressed by a security called a share. From this came the name - joint stock. The participants of a joint-stock company (shareholders) are the owners of its shares. Shareholders are not liable for the obligations of the company and bear only the risk of losses within the value of their shares. Shareholders have the rights to manage the company, to receive part of the profit in the form of dividends, to part of its property in the event of its liquidation.
What is a share. Types of shares.
A share is a piece of paper that secures to its owner the right to own part of the company. For example, if the capital of a company is divided into 1000 shares and a shareholder owns two shares, then he owns 0.2% of the capital of the company. There are two types of shares: ordinary and privileged.
An ordinary share is a security that gives the right to own the property of a business or joint-stock company. The owners of ordinary shares are full shareholders, since each of them has the right to vote at the general meeting of shareholders, which makes it possible to participate in the election of the board of the company, to take part in the appointment of managers, in determining the direction of the joint-stock company, to approve the annual report of the company.
Preferred shares are a special type of company stock that has a higher status. Preferred shares either do not give the shareholder the right to vote in the company, or may give more weight to the voice. Dividends are paid first to holders of preferred shares, and only then to ordinary ones. When a company is liquidated, preferred shareholders receive their share of the assets before ordinary shareholders receive them. The number of preferred shares in companies is limited (usually no more than 25%).
In addition to shares, a joint-stock company can also issue another type of securities - bonds. A bond is a debt security. Buying a bond means that you lend money to the company. The bond is issued for a limited period, after which the company pays the holder of the bond its face value and a mandatory, as a rule, fixed percentage of the face value.
Types of joint-stock companies.
The joint stock company is divided into two types: open (JSC) or closed (CJSC). An open joint stock company is a company whose shareholders may resell or transfer their shares without the consent of other shareholders. An open joint stock company may conduct an open subscription for shares issued by it. JSC is obliged to annually publish for general information the annual report, balance sheet, income statement. Distinctive features of an OJSC are an unlimited number of shareholders and free circulation of shares on the market.
A closed joint stock company is a company whose shares are distributed only among the founders or other predetermined circle of persons. Such a joint-stock company is not entitled to distribute its shares among an unlimited circle of persons. Therefore, only a limited number of persons (usually up to 50) can be shareholders of a CJSC. CJSC shares cannot be freely traded on the market.
Joint-Stock Company. Governing bodies.
The supreme governing body of a joint-stock company is the general meeting of its shareholders. At meetings of shareholders, one share provides one vote. Therefore, the number of votes of each shareholder is determined by the number of ordinary shares owned by him. A group of shareholders owning in the aggregate more than 50% of the shares of a joint-stock company acquires the right to control the activities of the joint-stock company. The General Meeting of Shareholders resolves the following issues:
Changing the charter of the company;
Change in the authorized capital of the company;
Election of the governing bodies of the company - members of the board of directors, the supervisory board of the company and early termination of their powers;
Reorganization and liquidation of the company;
Approval of the annual report, annual balance sheet, annual profit and loss statement of the company and distribution of profits.
In the period between general meetings, the JSC is managed by the executive body. The executive body can be a collegial body (board, directorate) or sole management (director, CEO) a company that carries out the current management of the company's activities. Executive agency accountable to the general meeting of shareholders.
The founders of a joint-stock company can be both numerous persons and one person who is the holder of all shares of the company. Information about this must be registered and published for public viewing.
Joint-Stock Company. Authorized capital and assets.
The authorized capital of a joint-stock company is the total nominal value of the company's shares acquired by shareholders. This total value is equivalent to the minimum value of the company's property, which guarantees the interests of the company's investors and owners of preferred shares and bonds. It should also be noted that a very important condition is that when a joint-stock company is established, all its shares must be distributed among the founders. Accordingly, an open subscription for shares of a joint-stock company until the authorized capital is paid in full by its founders is not allowed.
If, at the end of the financial year, the value of the net assets of a JSC turns out to be less than its authorized capital, the JSC is obliged to declare and register, in accordance with the established procedure, the decrease in its authorized capital. Accordingly, by decision general meeting shareholders, the JSC must reduce the size of the authorized capital by reducing the nominal value of the shares or by purchasing part of the shares in order to reduce their total number. Moreover, such a decrease is allowed only after notifying the company's investors, who are entitled to demand from the company early termination of investment and payment of the invested funds to them.
By decision of the general meeting of shareholders, a joint-stock company has the right to increase the size of the authorized capital by increasing the par value of shares or issuing additional shares. It should be borne in mind that an increase in the authorized capital is allowed only after its full payment and this increase cannot be used to cover the losses incurred by the company.
At the end of the financial year, the general meeting of shareholders decides on the division of the JSC (of course, if it exists). The meeting decides which part of the profits to allocate to the development of the joint-stock company, and which part to pay to shareholders in the form of dividends. Dividends are distributed primarily to preferred shares, and the remainder to ordinary shares. JSC is not entitled to pay dividends until the full payment of the entire authorized capital, as well as in the event that the value of the company's net assets is less than its authorized capital or becomes less than its size as a result of the payment of dividends.
Conclusion.
I hope, after reading this article, dear readers, you have got an idea about one of the popular forms of business organization. In the future, we will continue to talk about investing in stocks. This should be of interest to small business owners, as investing in stocks can be a very good source of income and a profitable investment.