Share Classes Definition Top 7 Types Of Shares Class You Must Know

In simple terms, it means dividing the shares into different “classes” of shares to confer different rights to different types of shareholders. These rights could be from voting rights, entitlement to profits, rights to dividends and capital, a different purpose and features depending on the shareholders’ requirements, etc.

Mark Zuckerberg, CEO of Facebook, has approximately 54% voting rights in the company, where he holds 28 % of class B sharesClass B SharesB Shares are a mutual fund share type which work with the “back-end load” structure, i.e., shareholders can pay the commission at the end of the investment period. Moreover, they might contain more or less voting rights as compared to the Class A shares. read more – which provides ten votes per share – to its shareholders. It makes us say that Mark Zuckerberg has a high voting power within the company.

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Top 7 Alphabetical Class of Shares

Here is the list of Most Common Classes of Shares –

1 – A Shares

It is a Classification of common sharesCommon SharesCommon stocks are the number of shares of a company and are found in the balance sheet. It is calculated by subtracting retained earnings from total equity.read more or preferred class shares. These Class A sharesClass A SharesClass A shares represent the common stocks category, which provides the shareholders with superior rights to voting, conversion, ownership, dividend, and liquidation. These shares cannot be publicly traded in the open market and are generally allotted to the company’s top management.read more shares might be convertible to another class at a favorable rate. These have lesser benefits in terms of dividends, asset sales, and voting rights when compared to the other class of shares.

In the case of Mutual Funds, this class has a front-end loadA Front-end LoadThe term “front end load” refers to the commissions or one-time charges deducted from investments at the time of purchase. It typically applies to mutual funds, insurance plans, and annuity plans where the load is deducted upfront and the net amount afterload is invested.read more attached for the investors, which is approximately 6% of the amount invested.

2 – B Shares

It is a Classification of common or preferred sharesPreferred SharesA preferred share is a share that enjoys priority in receiving dividends compared to common stock. The dividend rate can be fixed or floating depending upon the terms of the issue. Also, preferred stockholders generally do not enjoy voting rights. However, their claims are discharged before the shares of common stockholders at the time of liquidation.read more. These have different voting rights than A-shares. In the case of Mutual Funds, this class does not usually charge a front load; instead, they charge a contingent deferred sales charge (CDSC) or simply the “back end load.”

Also, B shares can be converted to A-share after a certain duration of holding, mostly seven to eight years.

3 – C Shares

It is a type of Mutual fundType Of Mutual FundBalanced funds, Equity Funds, Fixed-income Funds, Index funds, Money Market Funds, Funds of Funds, Global Funds, and Specialty Funds are some of the different types of mutual funds available in the market.read more share. It is characterized by the level load, which includes the annual charges of the fund as a fixed percentage to its investors. The charges include expenses around marketing, distributions, and servicing. Charges or load is just about 1% of the fund.

The investor pays for these throughout the year, unlike A or B. In A, the investor pays charges when the fund/ shares are bought. In B, charges are paid when the fund/ shares are sold. Also, class C shares mostly have lower expense ratios than B shares but are higher than the A-shares.

C shares are non-convertible to any other class of shares.

4 – D Shares

It is a type of Mutual fund share characterized as a no-load fund. Therefore, fees in terms of the commission are attached to transactions done. These fees are directly paid to the broker. These are usually available through discount brokersDiscount BrokersDiscount Broker is an online stock broker that assists investors in trading securities on the stock exchange by charging a relatively low rate compared to conventional brokerage firms. However, it does not offer any additional services like trading tips or wealth management. read more.

5 – I Shares

These are the Institutional shares that are available for institutional shareholders and investors. Institutional mutual fund share classes have the lowest expense ratios among the other mutual fund share classes.

The class of fund or shares has a low-cost structure and no load. Fund companies usually use this class of shares as an investment option for the institution. These institutions have a minimum investment of $ 25,000.

6 – R Shares

R class of shares is designated for work-based retirement accounts. This class of mutual fund shares is available through the retirement plan, mostly employer-sponsored, such as the 401(k).

These shares are unavailable in the open market and do not carry sales charges. However, like others, R shares carry the annual expenses towards a mutual fund.

7 – Z Shares

This class of shares is made available to the employees of the fund house that is managing the fund. These shares might be available to the employees in two options. Either by way of purchase or as part of their compensation.

The share classes for the company are divided into two classes after the company got split in stocksSplit In StocksStock splits refer to the process whereby a company increases its number of shares, reducing the per-share price of the stocks. read more having Alphabet Inc named as the parent company. The symbol GOOG represents class C, while the GOOGL stock represents the A shares. C shares do not have voting rights, whereas A shares, which are the GOOGL shares, have one vote each for the shares.

There are B shares and Google, but the employees and early investors own them. Each of them has the right to ten such shares, which, therefore, also makes them have super-voting powers. These shares are, however, not available in the open market.

It came into the picture when Google decided on a stock split due to the formation of Alphabet Inc as a parent companyParent CompanyA holding company is a company that owns the majority voting shares of another company (subsidiary company). This company also generally controls the management of that company, as well as directs the subsidiary’s directions and policies.read more. Therefore, shareholders of Google stock were entitled to one share of the voting stock of GOOGL and one share of the non-voting GOOG stock for each share held.

Advantage

It helps the promoters of any company to retain its management control and give limited control to the shareholders.We are providing control to some shareholders for the dividendDividendDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity.read more due to each class of shareholders.In case of winding up of the company, limiting or denying certain shareholders the right to return of the company’s total capital;One set of shareholders would receive a return of capital and a fixed dividend percentage before the other classes of shareholders.Raise equity share capital, mostly for startup companies, without diluting the control of the founder members so that the decision-making remains easy without others participating in a profit-sharing planProfit-sharing PlanA profit-sharing plan is a defined contribution pension plan in which workers and employees are given the opportunity to get their share in the company’s overall profit, incentivizing them to contribute more and more to the company’s profit and motivating them to give their best efforts.read more.