Knowledge Base
Identify the different types of equities and their characteristics
What rights are attached to ordinary shares under the French Code de commerce?
Ordinary shares carry several fundamental rights: voting rights (the 'one share, one vote' principle except for double voting rights under the loi Florange), proportional dividend rights from distributable earnings, pre-emptive subscription rights during capital increases, information rights (access to accounting documents) and liquidation surplus rights. These rights are defined in Articles L228-7 to L228-29 of the Code de commerce.
What is the maximum rate permitted for an enhanced dividend on preference shares?
Article L232-14 of the Code de commerce specifies that the enhanced dividend cannot exceed 10% compared to the ordinary dividend. This rate is a strict cap to prevent imbalances between shareholders. The other options propose values that do not comply with the legal framework.
What is the main criterion distinguishing ordinary shares from preference shares?
The fundamental distinction is based on attached rights. Ordinary shares have uniform rights (voting, proportional dividend, etc.), while preference shares may have special rights (priority dividend, enhanced dividend, voting restrictions) as defined in Article L228-11 of the Code de commerce. This distinction was formalised by Ordinance No. 2004-604 of 24 June 2004.
What condition must be met for a priority dividend share without voting rights to recover its voting rights?
Under Articles L228-35-2 to L228-35-11, voting rights are automatically reinstated if the minimum dividend has not been paid for three consecutive financial years. This provision aims to protect holders in the event of prolonged financial difficulties.
Priority dividend shares without voting rights
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Priority dividend shares without voting rights, governed by Articles L228-35-2 to L228-35-11, offer a minimum dividend of 7.5% of the paid-up nominal value. They do not confer voting rights unless the dividend has not been paid for three consecutive financial years. Their issuance is capped at 25% of share capital.
Categorize items by dragging them to the appropriate zones
Items to categorize:
Types of ordinary shares
Possible restrictions on shares
Share types include ordinary shares and free shares. Possible restrictions concern the temporary/permanent suspension of voting rights or legal caps (50% for non-voting shares). This classification distinguishes structural characteristics from legal limitations.
Non-voting shares can represent up to 50% of share capital in a listed company.
Under Article L228-11 of the Code de commerce, non-voting shares cannot exceed 50% of share capital. However, for listed companies, this limit is reduced to 25%. The correct answer is therefore 'false' as the limit is 25% for listed companies.
Free shares immediately confer voting rights and dividend entitlements.
Articles L225-197-1 to L225-197-6 stipulate that free shares are allocated without financial consideration. During the minimum one-year vesting period, beneficiaries are not yet owners and therefore have neither voting rights nor dividend entitlements. The correct answer is therefore 'false'.