Ordinary or Common Share

Ordinary shares are securities issued by the company after the dividend has been distributed to the preferred shareholders from the profits earned. Investors who invest in ordinary shares get ownership of the company according to the amount of their investment, and they are considered as the owner of the company. As the owner of the company, ordinary shareholders have to bear more risk. The rate of dividend payable on ordinary shares is not fixed and may fluctuate according to the fluctuation of profits earned by the company. On the other hand, just because a company makes a profit does not mean that ordinary shareholders receive dividends, that is, it does not have to pay dividends on ordinary shares.

However, the more profits a company makes, the more likely it is to receive dividends. The company may also distribute bonus shares to ordinary shareholders in the form of dividends. In case of liquidation of the company concerned, only the ordinary shareholders can claim the remaining amount after paying the amount due to the debenture holders and preference shareholders. For this reason, investing in ordinary stocks is considered risky.

Securities tool like ordinary stocks are considered suitable only for the aggressive investors who are willing to take more risks to get higher returns. According to the current prevailing system, the face value of ordinary shares is usually Rs. 100. The liability of ordinary shareholders is limited to the amount they have invested, and they do not have to bear from their households even if they have to bear huge liability in case of liquidation of the company.