Gabriel Chikusela’s Post

Preference shareholders can influence the categorization of companies, transitioning them from subsidiaries to associates and vice versa (Section 47)   Every equity shareholder of a Co., is entitled to cast a vote on each resolution of the Co.; and the voting power of each member during a poll shall correspond to the proportion of their share in the Co's paid-up equity share capital.   Each PS in a Co. can vote only on matters that directly impact their preference shares. This includes votes on winding up or repayment or reduction of its equity or preference share capital. Their voting power in a poll is based on the amount of preference share capital they hold.   The ratio of voting rights for equity and preference shareholders will be the same as the ratio of their paid-up capital. Additionally, If the dividend for preference shares has not been paid for two years or more, the preference shareholders will have the right to vote on all company resolutions.   How the status of holding, subsidiary, and associate Co. may change over time, illustrated with examples.   XYZ Ltd. is a Co. with two shareholders: A Ltd. and B Ltd. A Ltd. possesses 4,000 equity shares, while B Ltd. holds 1,000 equity shares along with 5,000 preference shares. The total share capital of XYZ Ltd. comprises 5,000 equity shares and 5,000 preference shares.   Situation 1 – When dividend declared by the Co.. · XYZ Ltd. becomes a subsidiary Co. of A Ltd. as A Ltd. is holding more than 50% of the total voting power. · XYZ Ltd. becomes an associate Co. of B Ltd. as B Ltd is holding more than 20% of the total voting power. Situation 2 – When dividend is not declared for consecutive two years. · Where dividend is not paid to B Ltd. on the preference shares for consecutive two years, then B Ltd. will get voting powers as equity shares, thereby making B Ltd. the Holding Co. of XYZ Ltd.   For a company that possesses preference shares and is currently not declaring dividends, it is vital to keep track of compliance as well as the status of its subsidiary and associate entities. A Co. classified as a subsidiary today may later become an associate, and this transformation can occur in either direction. However, provision of Sec 47 does not apply to a private Co. if it is mentioned in its AOA.   It is essential to assess various important elements when working with this class of company, particularly in the context of investing in private organizations.   Considering the promoter's interest: if the company seeks to retain its voting power without experiencing dilution, it can revise its AOA prior to the execution of the transaction.   With respect to the interests of investors:, repayment, or reduction of if the Co's AOA feature a provision that restricts preference shareholders from obtaining voting rights after two consecutive years of not receiving dividends, investors will seek its removal before finalizing their investment in the Co. #happylearning #csstudents #companylaw #ICSI

I started a New 5 Days Series Naming “ The Commerce Thing “ ( Second Article ) Today I want to share about “ Equity “ This term is often used in finance to represent ownership in a company, typically referring to the value of shares issued. The Indian Companies Act 2013 recognises 7 types of companies based on size, no of members, control,liability, listing, intended business activity and country of origin. 1. OPC( one person company) 2. Private limited company 3. Public company 4. Sole proprietorship 5. Partnership 6. Limited liability partnership (LLP) 7. Section 8 company (NGO) Equity generally refers to Public company/ Public limited company. Beacause they are authorised to raise money from public for their business operations . Companies can issue three types of shares Preference shares, Equity shares and non-voting shares. A share, also known as stock or equity, is a unit of ownership in a company. When a person buys shares in a company, they become a shareholder and part owner of the company. 🎯Equity share holders are the owners of the company with high potential returns as well as risk tolerance. 🎯Preference share are for cautious investors who want a steady and consistent returns on their investment. 🎯Non-voting share are issued to family members of Directors or Board members to raise money without diluting control as they do not carry voting rights in general body meetings and other matters. The return given to shareholders is called’ Dividend’ . Let’s understand with the help of an example Company has Rs 10 lakh of Net Profit ( after deducting all expenses) and Prefernce shareholders has 10% returns ( which is fixed at the time of issue) will be given first. Rest profit goes to equity shareholders as per decision on how much to reinvest . So equity shares are either in maximum profit or loss , that’s why they are called as risk- takers as well. The amount a company pays out in dividends relative to its net income is called the dividend payout ratio. At the time of investment in shares, this is an important element to consider. #equityshares #preferenceshares #shares #publiclimitedcompany.

As a shareholder, it’s worth your time to understand what sort of rights you have. You never know when you may need to turn to the legal system during your investing career. If a company issues only one class of shares (e.g., only common shares), then those shares must have, at minimum, the following rights: (1) the right to vote on certain corporate affairs (name change, change of headquarters) (2) the right to receive dividends (if the Board of Directors have declared a dividend) (3) the right to receive the remaining assets of the company after it is dissolved (assuming there are any assets left for shareholders to claim). At the end of the day, shareholders must remember that they are the owners of the companies they are invested in. The CEO and Chairman of the Board may be powerful corporate figures, but they are still subordinate to the will of the shareholders.  . . . #shareholderrights #valueinvesting #growthinvesting #dividends #younginvestor #canadianinvestor

I'm posting this to ask whether anyone else has experienced this, and to raise awareness of what I think is an issue for small investors. Today I received notice that a publicly-traded company I have invested in over the past few years (CRBK) will be "going private". The company's stock has been lagging in recent years, but based on quarterly reports over the past year or so, it seems they may be turning a corner. Expenses have been reduced/levelled; there's good retention of existing customers and a slowly growing base of new customers/revenue. They appear to be poised to start becoming profitable in the foreseeable future. So I find myself feeling and wondering whether this "going private" is an attempt by majority shareholders (larger/wealthier investors) to ensure the benefit of future growth is reserved just for them. And this is the 2nd time I've experienced this in the past year or so, where a company I invested in - and suffered losses with, but stuck with them believing the company had future growth potential - only to have the company "go private" when it appears poised to turn a corner (ex. revenue growth; favourable legislation & regulatory approvals, etc.). With the first time it happened, the company paid minority shareholders for their shares at a price that was slightly above the market value of the shares at the time, but this still left me with some small overall losses after 3 years - and now no opportunity to recoup them, or to participate in any additional growth if/when the company is profitable. Isn't that what this whole system is supposed to be about: taking the risk of investing in a company, knowing you may lose your money if they do poorly, but that you could make money if they do well? Something about this seems wrong and unfair, especially for smaller/minority shareholders. Is the playing field level when larger/wealthier shareholders and corporate executives can just cut minority shareholders out of any possibility of recouping losses and sharing in future growth? In doing some research, publicly-traded companies "going private" appears to be something that's started happening more frequently. Is it another example of how wealth (and even opportunity of future wealth generation) in our society is getting more and more concentrated in the hands of the already-wealthy few? Looking at provincial and federal business corporations legislation, I don't see anything that prevents this. It appears that as long as shareholders are being offered slightly more than the current market value of the shares, they have to take it. But shouldn't there be something in the legislation to account for the fact of small and minority investors funding a company (often at a loss) during the rough times, only to be cut out of any participation in possible future growth once things look like they may start to get better? Maybe we can ask the experts? Kevan Cowan Grant Vingoe, ICD.D (he-him) Naizam Kanji

A dividend is the distribution of a portion of the company's earnings, decided and managed by the company’s board of directors, and paid to a class of its shareholders. Larger, more established companies with more predictable profits are often the best dividend payers. These companies tend to issue regular dividends because they seek to maximize shareholder wealth in ways aside from normal growth. #investing #finance #dividend #licentia

Directors vs. Shareholders: Key Differences 📍 Ownership: 📌 Shareholders: Own the company through shares; considered the owners (often called 'members'). 📌 Directors: Do not own the company unless they are also shareholders. 📍 Role: 📌 Directors: Manage the company's business and operations; responsible for day-to-day running. 📌 Shareholders: Hold ultimate decision-making power; vote on key issues, especially when the board fails to resolve them. 📍 Appointment/Removal: 📌 Directors: Appointed to the role and can be removed from their position. 📌 Shareholders: Cannot be removed, unless their shares are transferred to someone else. 📍 Requirement to be the other: 📌 Directors: Not required to be a shareholder, unless specified by the articles of association. 📌 Shareholders: Have no automatic right to be a director. 📍 Overlap: 📌 It is possible for directors and shareholders to be the same people. 📍 Compensation: 📌 Directors: Receive a salary determined by shareholders; may receive equity incentives. 📌 Shareholders: Do not receive a salary; compensation comes from dividends or capital appreciation. 📍 Dividends: 📌 Shareholders Receive dividends, which are a periodic distribution of the company's profits.

14 Examples of Owners Equity by Josh Aharonoff, CPA Owners Equity represents the owners right to the assets in the company 1️⃣ Preferred Stock ➡️ Stock given to shareholders, often with liquidation preferences to assets & dividends 2️⃣ Common Stock ➡️ Stock given to shareholders which typically comes with voting rights 3️⃣ Retained Earnings ➡️ An accumulation of your net income from your P&L not yet distributed to shareholders via dividends 4️⃣ Par Value ➡️ The nominal value of a share of stock, IE the legal limit that the price cannot go below 5️⃣ Additional Paid-in Capital ➡️ The excess amounts above par value received for stock 6️⃣ Owners draw ➡️ Withdrawal of funds from a business by a business owner 7️⃣ Equity Issuance Fees ➡️ The costs associated with issuing new equity, such as underwriting fees, legal fees and accounting fees. Shown as a reduction in equity (contra-equity account) 8️⃣ Partner Contributions ➡️ Investment of funds into a partnership by one or more of the partners in return for a share of ownership 9️⃣ Treasury Stock ➡️ Stock that a corporation has repurchased from its shareholders 🔟 Simple Agreement for Future Equity (SAFE): Represents a right for an investor to receive equity in the company at a future point in time, subject to specific conditions. 1️⃣1️⃣ Accumulated Other Comprehensive Income ➡️ Amount of gains and losses that a company has realized but has not yet recognized in its earnings 1️⃣2️⃣ Stock Options ➡️ an agreement that gives employees or the right to buy company stock at a certain price within a certain time frame. 1️⃣3️⃣ Opening Balance Equity ➡️ Used to record the initial investments in the company made by the owner. 1️⃣4️⃣ Warrants ➡️ A security that gives the holder (often non employees) the right to purchase company stock at a certain price within a certain time frame. Those are my examples of Owners Equity...what would you add? Let us know in the comments below 👇 #accountingtips #accounting #financeandaccounting #financialaccounting #financialanalysis #finance #OwnersEquity

𝐂𝐨𝐦𝐦𝐨𝐧 𝐯𝐬. 𝐏𝐫𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐒𝐡𝐚𝐫𝐞𝐬 𝐂𝐨𝐦𝐦𝐨𝐧 𝐬𝐡𝐚𝐫𝐞𝐬 Purchasing common shares gives you an ownership position in the business, with voting rights that give you a say in corporate decisions in addition to a proportionate ownership part. 𝐏𝐫𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐒𝐡𝐚𝐫𝐞𝐬 Preferred shares have qualities similar to bonds, but they also share certain characteristics with regular shares. Preferred shareholders get fixed dividend payments regularly, just like bondholders do. Moreover, the par value of preferred shares is subject to variation based on shifts in interest rates.   𝐃𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞𝐬: 𝐂𝐨𝐦𝐦𝐨𝐧 𝐯𝐬. 𝐏𝐫𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐒𝐡𝐚𝐫𝐞𝐬 • Voting rights Shareholders are entitled to vote at shareholder meetings and to participate in choices that affect the course of the business. Preferred shareholders, on the other hand, typically do not have the ability to vote, which means they are unable to use voting to affect corporate decisions directly. • Dividends Variable dividends to common shareholders are subject to the company's profitability and the board of directors' decision-making. Preferred shareholders are entitled to set dividends, which give them a steady source of income. • Claim to earnings When it comes to asset distribution in case of bankruptcy , preferred shareholders normally take precedence over common shareholders. This implies that the likelihood of preferred shareholders getting their money back before common shareholders do is higher. #finance #investmentbanking #linkedin

Let's understand about preference shareholders. Definition- . They carry preferential rights with regards to the payment of dividends. . The dividend of these shares are fixed. . Whenever the company decides to distribute his profit, then preference shareholders will be their top most priority. Advantages are- . Preferential rights (to be paid at first position) . Fixed income . Voting rights (only related to their interest.) Disadvantages are- . Limited voting rights (can't give their opinions about any other matter other than their interest) . Fixed income (No surplus, bonus or extra profit) . No guarantee over assets. Types of preference shares 1> CUMULATIVE PREFERENCE SHARE- If the dividend is not paid to them in any year due to some reason then the company will pay it in another financial year. Example- 2013 not paid ,2014 not paid ,2015 paid then on 2015 the company will also give the dividend for 2013 and 2014. 2> REDEEMABLE PREFERENCE SHARE- Shares which are redeemed at future date i.e, the company will repurchase the shares at a higher price on a fixed date. 3> CONVERTIBLE PREFERENCE SHARE- Shares which get convert into company's common share after a predetermined time or at a specific date i.e, the debt or the loan will get converted into equity. 4> PARTICIPATING PREFERENCE SHARES- In this the shareholders can participate in the surplus of the organization even after getting their dividend i.e, they will also get the additional amount which is distributed among equity shareholders. Example- If preference shareholders gets a dividend of 10rs and equity shareholders get a dividend of 14rs, then participating preference shareholders will also get 14rs. Preference shareholders has both pros and cons of holding shares sometimes it proves to be less risky and sometimes it results in low return on investment. #preferenceshares #financialmarket #investmentbanking #return #dividend #profit

What are the Benefits of Being a Shareholder? Shareholders contribute significantly to a company's growth, but they also receive various benefits: Potential for Financial Gains: As the company grows, so does the potential for shareholders to receive increased dividends or see an appreciation in the value of their shares. Influence in Corporate Decision-Making: Equity shareholders can influence decisions that shape the company's strategic direction, including expansion plans, mergers, or policy changes. Limited Liability: Shareholders enjoy limited liability, meaning they are not personally responsible for the company’s debts. Their risk is limited to the amount they have invested in shares. Shareholders play a pivotal role in a company’s lifecycle, providing the financial foundation for growth and benefiting from the company’s success. Understanding the different types of shareholders, their rights, and responsibilities is essential for anyone considering an investment in a company. For a more detailed look at who can become a shareholder and how they contribute to a company, visit RegisterKaro’s comprehensive guide on shareholders. Read Full Blog Post- https://lnkd.in/dsSKPJWF