The issued capital is the capital contributed by investors through the purchase of shares in the company.
There are mainly two kinds of shares: ordinary and preference shares. The ordinary shareholders generally will have benefit in voting rights, dividends and residual claim. Voting rights means the rights to vote on major issues in the company, such as the elections of board of Directors’ members. Dividends mean the proportions of the company’s profit pay out to the shareholders. Residual claim is the right of company’s assets during the liquidation of the company. On the other hand, preference shareholders do not usually granted voting rights, have priority payment of dividends than ordinary shareholders and normally have a fixed dividend rate.
When a company decides to issue more shares to the public, they may participate by underwriting some of their shares to a financial service provider in order to minimise the risk of under subscription. Underwriting is the process by which investment bankers raise investment capital from investors on behalf of corporations. The underwriter should also buy the remaining shares that are not sold on the issue date.
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