Voting Shares

A voting share is a certificate of ownership in a publicly traded company which endows its holder with greater voting rights than their capital share would otherwise allow for.

This type of share is issued by companies who want to confer greater voting power on specific shareholders.

Voting shares are primarily used by companies which were held by a limited number of shareholders (their founders or investors, for example) prior to being publicly listed through an initial public offering (IPO). In this case, the company may want to grant special voting rights to its original shareholders in order to minimize the risk of these shareholders being outvoted by new shareholders after shares become available to the general public.

By conferring greater voting rights upon its management or key shareholders, a company may also use voting shares to prevent hostile takeovers.

When no voting shares are issued, voting rights are based entirely on the number of shares held by each shareholder.

In Switzerland, as in many other countries, voting shares are typically regular shares which bring the same voting rights as other shares issued by a company. The primary difference is the nominal value of the shares. A company may allocate shares to its founders or other key shareholders by selling them large numbers of shares at a preferred rate, thus endowing them with significant voting rights at a low cost.

Example:

Before its initial public offering of 1 million shares priced at 50 Swiss francs per share, a company allocates an additional 1.2 million shares to its founders at a cost of 5 francs each. By doing this, it guarantees its founders a majority vote at a price they can afford.

The shares, in this example, are identical to those sold through the IPO and grant the same voting rights. The only difference is their nominal value.

More on this topic:
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