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What is the stock? How many types of stocks?
Stock certificate means a certificate issued by a joint stock company, a book entry, or electronic data certifying the ownership of one or more than one share of such company. (Clause 1, Article 121, Law on Enterprise 2020).
Besides, Clause 2, Article 4, Law on Securities 2019 also prescribes that:
2. Stock means a type of security certifying its holders’ lawful rights and benefits to a portion of the equity of an issuing institution.
In accordance with law provisions prescribed in the Law on Enterprise 2020, stocks are Ordinary stocks (normal stocks) and preferential stocks. Within that, preferential stocks are divided into 04 types as follows: Voting preferred stocks; Dividend preferred stocks, Redeemable preferred stocks; other preferred shares.
Clause 1, Article 121, Law on Enterprise 2020 requires the contents as follows:
a) Name, enterprise identification number and head office address of the company;
b) Number of shares and type(s) of shares;
c) Par value of each share and total par value of shares indicated on the share certificate;
d) Full name, contact address, citizenship, serial number of the legal paper, for individual shareholders; name, enterprise identification number or serial number of the legal paper and head office address, for institutional shareholders;
dd) Signature of the at-law representative of the company;
e) Registration number in the register of shareholders of the company and the date of grant of the share certificate;
g) Other details as specified in Articles 116, 117 and 118 of this Law, for a preferred share certificate.
Therefore, stocks are the ownership certificate of shareholder in that joint stock companies. And joint stock companies have ordinary and preferential stocks.
Name of stocks
There are 02 types of stocks: ordinary stocks and preferential stocks in accordance with the law provisions prescribed in Law on Enterprise 2020.
An ordinary shareholder has the right: to attend the meeting, present opinions; vote at the General Meeting of Shareholders as prescribed in Article 115, Law on Enterprise 2020.
Voting preferred shareholders have some rights and are restricted in some rights compared with the ordinary shareholder. In particulars:
- Voting preferred stocks; Have much more voting preferred stocks. Voting preferred shareholders have the right to vote like ordinary shareholders and may not transfer their stocks to another person (except in cases of transfer under a court effective judgment or ruling or inheritance).
- Dividend preferred stocks: A dividend preferred stock means a share for which dividends shall be paid at a rate higher than that paid for an ordinary stock or at an annual fixed rate, may neither vote, attend meetings of the General Meetings of Shareholders nor nominate candidates to the Board of Directors and Supervisory Board (except for the case that a resolution of the General Meeting of Shareholders that contains unfavorable changes to rights or obligations of preference shareholders).
- Redeemable preferred shares; A redeemable preferred share means a share that may be redeemed by the company upon demand of its owner or under conditions stated in the redeemable preferred share certificate. Redeemable preferred shareholders have other rights as ordinary shareholders, except in the case that they neither vote, attend meetings of the General Meetings of Shareholders nor nominate candidates to the Board Directors and Supervisory Board (except for the case that ordinary shares may not be converted into preferred shares. Preferred shares may be converted into ordinary shares under resolutions of the General Meeting of Shareholders).
Besides, the stocks are also classified as follows:
- Registered stocks: Full name of owner in stocks. This type of stock is transferred so complicated and must register at the issuing agencies and be permitted by the Board of Directors.
- Bearer stocks: No name of owner in stocks. Investors can freely transfer these stocks.
Besides, a stock investor can classify stocks into:
- Penny stock or small caps A penny stock typically refers to the stock of a small company in the trading floor.
- Blue-chip stocks: On the contrary to a penny stock, blue-chip stocks refer to the stock of a big company with strong finance.
- ESOP stock (Employee Stock Ownership Plan): This stock is for senior employees with great contributions to the enterprises.
- OTC stocks: Are not listed and traded on the floor of the company issuing stocks, banks and securities companies.
