What are ordinary shares?

Ordinary shares are also know as equity shares, or as common stock in the US, and is a share that carries voting rights in the company concerned. These rights derive from the fact that an equity share represents part-ownership of the company.

Where have you heard about ordinary shares?

When you purchase a company's common stock or equity shares, you're nearly always buying the ordinary shares. That's what most people are referring to when they talk about stocks and shares. A financial adviser may have drawn the distinction between ordinary shares and preferred stock or preference shares. Investors holding ordinary shares will receive voting forms for company meetings.

What you need to know about ordinary shares.

Ordinary shares are probably what most people imagine when they think of company shares. They represent a 'piece' of the company in terms of ownership, thus an ordinary equity shareholding of 25% of the total means that shareholder owns a quarter of the company. These shareholders have voting rights up to the proportion of the company that they own, but as owners they rank last in the list of creditors should the company go bust. Furthermore, their dividends are not guaranteed. This is in contrast to a preferred stockholder (holders of preference shares), who do not have a vote but whose dividends are fixed and who rank as creditors ahead of equity shareholders.