Ordinary action: what is it – Dictionary of Economics

Common Stock Definition

The action can be defined as the title that, representing an aliquot part of the share capital, confers the status of partner to its legitimate owner.

Thus, the action has a triple aspect:

˗ as part of the capital

˗ as right

˗ as title-value

The share as part of the capital

Article 1.3 of the TRLSC says that “the capital will be divided into shares”, which represent aliquot parts of the capital stock. “The creation of actions that do not respond to an effective patrimonial contribution to society will be null” (art. 59.1 of the TRLSC).

Therefore, the sum of the par value of all the shares represents the share capital.

So that:

Number of shares × Par value = Share capital

The action must have as counterpart the effective contribution of the partner who signs it. This contribution can be made at the time of foundation or later. In the first case, the share is said to be released and can be issued in registered or bearer form. In the second case, the obligation arises for the member to pay the pending disbursements and, in order to identify the debtor, it can only be issued in registered form until the amount has been fully disbursed.

action as right

The shareholder, as a shareholder, is the holder of a set of rights, powers and faculties that are linked to the action. The quality of partner in the corporation is fungible, and some partners can be replaced by others with the simple transfer of shares, since these are an expression of the legal status or status of partner as a set of corporate rights and obligations.

Accuracies

Ownership of the share grants the shareholder certain rights and, eventually, if the share is not fully paid up, it leaves him liable to the company. These rights and obligations form the legal position of the shareholders.

Shareholder rights

˗ In accordance with article 93 of the TRLSC, the shareholder will have, at a minimum, the following rights:

˗ Right to participate in the distribution of company profits (right to dividend) and in the equity resulting from the liquidation.

˗ Right of preferential subscription in the issuance of new shares or debentures convertible into shares.

˗ Right to attend and vote at general meetings and to challenge company resolutions.

˗ Right to information.

The action as title

Article 92 of the TRLSC provides that: «Shares may be represented by titles or by book entries. In both cases they will be considered as securities.

Share Classes

a) Ordinary shares. They constitute elements of their own patrimony. They receive dividends freely assigned by the general meeting of shareholders, and do not have a special right of reimbursement.

b) Preferred shares. They confer some privilege to their holders over the ordinary ones (for example, preference when receiving the settlement fee).

c) Shares without voting rights. They exchange the right to vote for a higher return by collecting more dividends.

d) Redeemable shares. The shareholder can receive the redemption of his shares.