What is a share in a company?

ASIC defines a share as 'an instrument that represents:

• a right to participate in the ownership of a company; or
• a right to income or assets from a company.'

Shares in a company may be issued by the company itself or purchased by another individual or entity. The number of shares issued by a company is limited by its constitution and or the Corporations Act. There are different types of shares that a company may issue, including ordinary shares, preference shares and deferred shares.

ASIC also has guidance on what rights are attached to shares. Ordinary shares typically give the holder the right to vote at shareholder meetings and to receive dividends. For example:

• Preference shares may give the holder the right to vote at shareholder meetings and to receive dividends, but they rank behind ordinary shares when it comes to the distribution of a company's assets on winding up. 
• Deferred shares do not carry any voting rights and may only entitle the holder to a share in the assets of the company on winding up. 

It is important to note that the rights attached to shares can vary depending on the type of share and the company's constitution. ASIC's website provides more information on the different types of shares and the rights attached to them.

Other questions in Company Registration