Types Of Shares In Nigeria

As a shareholder, you should be aware of the actual nature of shares and their worth. Simply put, when someone holds stock in a firm, they own a piece of that company. However, there are some rights and responsibilities that come with being a shareholder. In addition, many sorts of shares exist in Nigeria, and depending on the type of shares you own, you can profit or lose money on your investment.

What exactly are shares?

A share is a unit of a firm that represents a shareholder’s interest in the company and is equal to a certain amount of money. It basically represents a portion of a company’s share capital and gives the shareholder certain rights and responsibilities. According to the company’s memorandum and articles of association, a share’s holder has certain rights and obligations. It can also be transferred from one person to another, subject to the limitations set down in the legislation or the articles of incorporation.

What are the legal rights and obligations that come with owning a share?

The following are examples of what a shareholder can do, but they are not limited to:

  • According to the law, voting in the proceedings of a company or general meeting, which is the corporation, counts as one vote per share.
  • When the company declares a dividend, you have the right to receive it based on the number of shares you own.
  • Attending general meetings and contributing to the company’s affairs
  • The right to safeguard a proprietary interest in the company’s management as well as check the company’s statutory books.
  • Leisure to buy more stock in the company before it is offered to other possible investors. This is referred to as “preemptive rights.”
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Types Of Shares

In Nigeria, the many forms of shares are divided into five groups. They are as follows:

1. Ordinary shares

Ordinary shares are those that do not come with any unique rights or responsibilities for the shareholder. Furthermore, the shareholder carries the majority of the risk associated with the shares’ liabilities.

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2. Preference shares

With preference shares, the shareholder gains specific rights. Essentially, if you own preferred shares, you will earn annual set dividends. Furthermore, preference shareholders gain more than ordinary shareholders in general.

3. Deferred shares

This shareholder class is distinct from the preference and ordinary share classes. They only get dividends when all other classes have received a minimum dividend. As a result, they have no rights to the company’s assets or dividends until other shareholders are paid.

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4. Cumulative shares

In a case where the corporation does not have enough distributable reserves, this form of stock can accumulate. It’s a preferred stock option that says that the firm should pay outstanding dividends to cumulative shareholders first, before paying dividends to other classes.

5. Redeemable shares

The corporation created these shares in such a way that it can buy them back at a predetermined time in the future. It’s more akin to a loan system in which shares are sold to investors for cash inflow and then purchased at a profit later. However, depending on the articles of association or the shareholder’s agreement, the shareholder may sell or transfer the shares back to the corporation.

Conclusion

The legal rights and privileges that come with becoming a shareholder are determined by the type of stock. Shares in Nigeria, Basically, before buying a stock, you should know what kind it is and what rights it gives you in the company.

Source: Nyscinfo

Updated: December 17, 2021 — 9:39 am

The Author

Stephen Adoga

Stephen Adoga is a trained journalist, researcher, creative writer, content creator, video editor and freelancer. He studied Mass Communication at the Lagos State Polytechnic, Ikorodu, where he acquired requisite training for the practice of journalism. He loves the media. His interest mostly lies in the print medium where his creative writing skill makes him a perfect fit.

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