Types of Shares Explained

Not all shares are created equal. While shares of all types do represent ownership in a company’s stock, there are important differences between different kinds of shares. Shares are categorized based on the terms and conditions governing their transferability and the voting rights you receive as a shareholder. This moneyland.ch guide explains the differences between the most important share types.

Important: If your only reason for investing in stocks is to profit from capital gains and dividends, the differences between share types will have little noticeable impact on your investment activities.

Differences in transferability:

• Bearer shares

A bearer share gives ownership in a company’s stock to whoever holds it, rather than to a specific person. Bearer shares can be quickly and easily transferred from one shareholder to another without the need to make changes to the contract itself. The company does not know who holds its bearer shares. Instead, ownership of bearer shares is recorded by the banks that handle the purchase and custody of shares for investors.

Most of the stocks listed on Swiss stock exchanges are made up of bearer shares. However, the use of bearer shares for Swiss companies that are not listed on stock exchanges has been forbidden since 2021, at which time unlisted bearer shares were converted to registered shares.

• Registered shares

As their name implies, registered shares are shares that are registered in the name of a specific owner. Ownership of registered shares is recorded in the company’s shareholder register, giving the company an overview of its shareholders. Unlike bearer shares, registered shares cannot simply be transferred from one owner to another. A transfer of ownership requires an endorsement - a legal contract outlining the change of ownership. Most Swiss stockbrokers handle this process for you automatically. It is important to note that with many stockbrokers, registered shares are registered in the bank’s name, and not in yours (more on this in the box further down).

• Restricted shares

Restricted shares are a sub-category of registered shares that have additional terms and conditions governing the transfer of ownership. Before you can transfer restricted shares to another owner, you must get the approval of the company that issued the shares. This gives the company more control over who can become a shareholder, and can be used as a means of preventing unwanted takeovers, among other things. As with registered shares, an endorsement is required for a change of ownership.

Differences in voting rights:

• Common shares

Common shares entitle their holders to vote at the issuing company’s annual general meeting. In many countries, including Switzerland, common shares are the most widely-used type of shares.

• Preferred shares

As their name implies, preferred shares entitle their holders to various privileges, compared to common stock. Examples may include higher dividends or more voting power. The terms and conditions vary between countries and individual companies. 

In many countries, including Germany and the United States, preferred shares typically have higher dividends, but do not include voting rights.

• Participation certificates

Participation certificates are similar to common shares in that they also entitle you to receive shareholder dividends. The main difference is that unlike common shares, participation certificates do not give you voting rights. For that reason, they are sometimes referred to as non-voting shares. Participation certificates are only issued by companies in Switzerland and Austria. In Germany, a similar type of stock known as profit participation certificates is used. 

• Voting shares

Voting shares are shares that have a lower nominal value than common shares, but give you the same voting rights. A company can choose to include a clause in its statutes that confers the same voting rights on all shares regardless of differences in their price. Voting shares are created when a company issues different share classes with the same voting rights, but differing nominal values. 

More on this topic:
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How to choose the right stock to invest in
What you should know about shareholder dividends