A Brief Guide on the Differences Between Malaysia Ordinary and Preference Shares
Buying or selling shares, but have no idea which to choose (yes, there are different types)? It can be tricky to decide at first on which is best. If you are buying, you may be interested to know what each type entails which kind of restriction and responsibilities. On the other hand, if you are selling, you might want to consider what kinds of shares you would like to sell. These are fundamental questions, and it all depends on the needs of the buyer and seller. Hence, it is crucial to know the differences between types of shares. The differences between Malaysia ordinary and preference shares, a brief description of everything you should know.
Types of Shares
We need to get the two primary types of shares out of the way, ordinary and preference shares. Shares are investments which you put in a company, and upon such investment, you own part of the company in a sense. Through it, you may reap potential returns and even be granted the right to influence individual decisions in a company through voting.
Shareholders of this form of shares have voting rights and are entitled to dividends. Ordinary shareholders are entitled to attend the Annual General Meeting (AGM) of a company. They will have the voting rights in certain situations: electing new directors, deciding upon a potential merger, and more. In terms of dividends and surplus of assets, it is not fixed and is highly dependent on the performance of a company in a fiscal year.
Shareholders in this form of shares still invest in the company, but usually, they will have no say or votes in affairs related to the company. Unlike ordinary shareholders, the dividends given annually are fixed in amount regardless of the company’s performance.
What Are the Major Differences?
1. Voting rights
Ordinary shareholders can vote in certain situations. While preference shareholders usually cannot. Regular shareholders will have to attend AGMs and cast their votes when the situation arises.
2. Yields (Dividends)
Ordinary shareholders can earn more if a company performs well, but the same is also true that if the company performs poorly, shareholders will gain less. Preference shareholders, however, are fixed in dividends. Ordinary shareholders are also the last to get paid, while preference shareholders are the first to be paid.
3. Levels of Risk
Ordinary shares possess more risk because dividends are dependent on the outcome(s). The phrase “high risk, high reward” does apply if the company does well. Those who choose this form of investment will benefit if they have done initial research on its performance. If you prefer lower risks, look no further than preference shares. This form of shares gives you a fixed amount of dividends, and in events such as liquidation or bankruptcy, you stand a higher chance to lay claims on company assets. It is a low-risk option.
If You Are Selling…
Shares are useful in gaining the capital you will need for your business. The question is: which type are you selling? Your company can decide which is best and also in accordance with the law. Alternatively, you can again hire Malaysian incorporation service providers or corporate service providers to help you sort these out.
There’s where we step in – 3E Accounting Malaysia is adept in the many formal intricacies and can provide sound and professional advice tailored to your company’s needs. If you’re looking for Malaysia Incorporation Service Provider, your search ends with us. Consult us to find out more about our leading incorporation services!