A company may issue different types (also known as “classes”) of shares. These can include:
- Ordinary Shares
Ordinary shares are the most common type of share. They typically carry voting rights but do not give shareholders the right to receive or demand dividends.
Ordinary shareholders also receive less dividends compared to shareholders who hold preference shares. Companies may divide their ordinary shares into different classes (e.g. “A” and “B”) with different rights attached to each class.
- Preference Shares
Preference shares confer certain preferential rights on the holder, which are superior to those of ordinary shares. Typically, these preferential rights include the right to fixed dividends, priority in receiving dividends over ordinary shareholders, and priority in the return of capital if the company goes into liquidation.
- Redeemable Preference Shares
Redeemable preference shares allow for the repayment of the principal share capital to shareholders. The company may redeem these shares at an agreed value on a specified date or at the discretion of the directors, provided that the company is a going concern.
Redemptions can be paid out of the company’s capital using proceeds from a fresh issue of shares. The directors must lodge a solvency statement with ACRA through the "General Lodgement" eService via Bizfile.
- Convertible Preference Shares
Convertible preference shares typically carry rights to a fixed dividend for a particular term. At the end of this term, the company can choose to convert these shares into ordinary shares or leave them as they are. The conversion prices must be specified in the company’s constitution. If the price of ordinary shares rise, the conversion prices remain fixed, essentially allowing shareholders to purchase ordinary shares at a potentially lower price. The relevant conversion of shares transaction can be filed via "General Lodgement" eService in Bizfile.
- Treasury Shares
Treasury shares are ordinary shares that the company has acquired from its shareholders. Although the company is listed as the owner of these treasury shares, it is not allowed to exercise the right to attend or vote at meetings, nor can it receive dividends on these shares.
The total number of treasury shares held by the company is capped at 10% of the total number of issued ordinary shares. Any excess treasury shares (i.e., those exceeding 10% of the total number of ordinary shares) must be cancelled or disposed of within 6 months.
The company may sell, cancel, or transfer the treasury shares using the "General Lodgement" eService in Bizfile.
