Types of shares
Not all shares traded on the ASX have the same rights and characteristics. Find out about different types of shares and how you can identify them.
There are three different types of shares traded on ASX, each with their own characteristics. Understanding the differences between them is important as you make your investment decisions, since these characteristics can affect the way you decide to invest.
Most shares traded on ASX are ‘ordinary’ shares. Ordinary shares carry no special or preferred rights. Holders of ordinary shares will usually have the right to vote at a general meeting of the company, and to participate in any dividends or any distribution of assets on winding up of the company on the same basis as other ordinary shareholders.
Preference shares usually give their holder a priority or 'preference' over ordinary shareholders to payments of dividends or on winding up of the company. There are different kinds of preference shares with different rights and characteristics. Holders of preference shares usually have voting rights which are restricted to particular circumstances or particular resolutions, however this will depend on the terms of the shares.
Partly-paid shares (also known as contributing shares) are issued without the company requiring payment of the full issue price. At a specified future date or dates, the company is entitled to call for all or part of the outstanding issue price, and the shareholder at the time the call is due is legally obliged to pay the call.
Generally, a holder of a partly-paid share has the same rights as an ordinary shareholder to vote, to dividends and on winding up of the company, but those rights will be proportional to the amount paid on the share (except for a vote by show of hands, where a holder of a partly paid share has one vote, the same as any ordinary shareholder).
Retail investors are required to sign a client agreement with their broker before first trading in partly-paid shares, to acknowledge that they understand the risks involved.
The quickest way to identify whether a share is anything other than an ordinary share is through its ASX code.
Every product traded on ASX has a unique identification code which is displayed on ASX ticker boards and in media sharemarket tables. All securities issued by a company will incorporate the company's code. For example, the code for any security issued by Commonwealth Bank of Australia will include the code ‘CBA’.
The code for the ordinary shares of an ASX-listed company is the same as the company code, with three characters. If there are more or fewer than three characters in the code, the security is likely to be something other than an ordinary share.
For example, preference shares usually have a five letter code consisting of the company code and a two letter suffix, generally PA-PZ. Partly-paid shares usually have a five letter code consisting of the company code and a two letter suffix, generally CA-CZ (except CP).
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