In Australia, company shares represent ownership in a company.
When a company is formed, it may issue shares to its founders or investors, which signifies a stake in the company's assets and earnings. These shares can be of various classes, each with different rights and privileges. For example, ordinary shares typically grant the shareholder the right to vote at shareholders' meetings and to receive dividends, while preference shares might offer priority in dividend payments but not necessarily voting rights.
Companies must maintain a register of their shareholders and the shares they hold, including details such as the class of shares, the number of shares, and whether they are fully paid or not. This register is important for both the company and the regulatory body, ASIC, as it ensures transparency and accountability in the ownership and control of the company.
In the event of a company's liquidation, shareholders may receive a portion of the assets after all debts have been paid, proportional to their shareholding. Understanding the specifics of shareholding in Australia is crucial for anyone looking to invest in or start a company, as it affects legal rights, financial returns, and control over the company's decisions.
In simple terms, much like companies on the stock market, many private companies also issue shares. This is true for Pty Ltd companies too. Issuing shares is a way of giving ownership of the company to one or more people. Anyone issued shares in the company is considered a shareholder, and has ownership of the company and decision making power respective to the amount of shares they hold.
In a simple example, if Beth holds 80% of the shares of a company, she owns 80% of the company and has the respective decision making power. If John holds 7% of the shares, he owns 7% of the company and has a much smaller say in the company than Beth.
The most common type of shares are Ordinary shares, meaning that there’s nothing special or different about the shares, and that they don’t come with special rights. For a company owned by one person, it’s typical to have between 1-100 Ordinary shares with between 1c and $1 paid per share and $0 unpaid.