Why different rights are used
Example 1 – Non-Voting Shares
A company may opt to provide remuneration to employees through the use of non-voting shares. This would allow the owners of a company to incentivise employees with a dividend scheme whilst maintaining full control. Issuing dividends in addition to a basic salary is more tax-effective ins certain situations.
Example 2 – Preferential dividend rights
A class of shares may be assigned preferential dividend rights. This would ensure that the given share class would take precedence when dividends are distributed ahead of any other class. This may be used as a means to attract potential investment. This would allow investors to receive a return on their initial investment when the company has made a profit before dividends are issued elsewhere.
The above is intended as a general guide only. we recommend contacting an accountant for professional advice when issuing multiple share classes with different rights attached.