Registered share: Explained
BY TIO Staff
|August 15, 2024In the world of trading, the term 'Registered share' is often thrown around. But what does it mean? How does it work? And why is it important? In this comprehensive glossary article, we will delve into the concept of registered shares, their role in the trading landscape, and their implications for investors and companies alike.
Registered shares are a type of security where the details of the owner are recorded on the register of the issuing company. This register includes information such as the name, address, and the number of shares held by the shareholder. This type of share provides companies with a greater level of control over who owns their shares and allows them to keep track of their shareholder base.
Understanding Registered Shares
Registered shares are a common type of equity security. They are called 'registered' because the details of the owner are registered with the issuing company. This is in contrast to bearer shares, where ownership is determined simply by possession of the share certificate, with no record of ownership kept by the company.
Registered shares offer several advantages for both the issuing company and the shareholder. For the company, it allows for better control and management of its shareholder base. For the shareholder, it provides a level of security, as their ownership is officially recorded and cannot be disputed.
The History of Registered Shares
Registered shares have a long history in the world of trading. They were first introduced in the late 19th century as a way for companies to have more control over their shareholder base. This was particularly important for public companies, which often had a large number of shareholders.
Over the years, the use of registered shares has evolved and adapted to changes in the trading landscape. Today, they are a common feature of the equity markets and are used by companies of all sizes and across all sectors.
The Mechanics of Registered Shares
When a company issues registered shares, it keeps a register of all the shareholders. This register includes details such as the name, address, and the number of shares held by each shareholder. The register is updated whenever there is a change in ownership of the shares.
The process of transferring registered shares is more complex than that of bearer shares. It involves updating the company's register of shareholders, which can often take some time. This can make registered shares less liquid than bearer shares.
The Role of Registered Shares in Trading
Registered shares play a crucial role in the world of trading. They are a common type of equity security and are used by companies to raise capital. By selling shares, companies can raise funds for various purposes, such as expanding their operations, investing in new projects, or paying off debts.
For investors, registered shares offer a way to invest in a company and potentially share in its profits. When you buy a registered share, you become a part-owner of the company. This gives you certain rights, such as the right to vote at the company's annual general meeting and the right to receive dividends, if the company chooses to distribute them.
Registered Shares and Capital Raising
One of the main reasons companies issue registered shares is to raise capital. By selling shares, companies can raise funds without having to take on debt. This can be particularly advantageous for companies that are in a growth phase and need funds to expand their operations.
When a company issues registered shares, it sets a price for each share. This price is often determined by the company's perceived value, as well as market conditions. Investors who buy the shares are essentially buying a piece of the company, with the hope that the company will be successful and the value of their shares will increase.
Registered Shares and Investor Rights
When you buy a registered share, you become a part-owner of the company. This gives you certain rights. One of the most important rights is the right to vote at the company's annual general meeting. This gives you a say in important decisions, such as the appointment of directors and the approval of financial statements.
Another important right is the right to receive dividends. If the company is profitable and chooses to distribute some of its profits to its shareholders, you will receive a share of these profits in the form of dividends. The amount of dividends you receive will depend on the number of shares you own and the company's dividend policy.
The Advantages and Disadvantages of Registered Shares
Like any type of security, registered shares have their advantages and disadvantages. Understanding these can help you make informed decisions when it comes to investing in registered shares.
The main advantage of registered shares is the level of security they provide. Because your ownership is officially recorded, it cannot be disputed. This can be particularly important in the event of a dispute or if the share certificate is lost or stolen.
Advantages of Registered Shares
One of the main advantages of registered shares is the level of control they provide to the issuing company. By keeping a register of shareholders, the company can control who owns its shares and can prevent unwanted takeovers. This can be particularly important for companies that want to maintain control over their shareholder base.
Another advantage of registered shares is the level of security they provide to the shareholder. Because the ownership of the shares is officially recorded, it cannot be disputed. This can provide peace of mind to shareholders, particularly in the event of a dispute or if the share certificate is lost or stolen.
Disadvantages of Registered Shares
One of the main disadvantages of registered shares is their lack of liquidity. Because the transfer of registered shares involves updating the company's register of shareholders, it can take some time. This can make registered shares less liquid than other types of shares, such as bearer shares.
Another disadvantage of registered shares is the lack of anonymity. Because the details of the shareholder are recorded on the company's register, the ownership of the shares is not anonymous. This can be a disadvantage for investors who wish to keep their investments private.
Conclusion
In conclusion, registered shares are a common type of equity security that play a crucial role in the world of trading. They provide companies with a way to raise capital and maintain control over their shareholder base, while providing investors with a way to invest in a company and potentially share in its profits.
Like any type of security, registered shares have their advantages and disadvantages. Understanding these can help you make informed decisions when it comes to investing in registered shares. As always, it's important to do your own research and consider your own financial situation and investment goals before making any investment decisions.
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