Be cautious when stepping into the Shareholder’s world
When a Guyanese company wishes to gain investment capital, it offers shares of the corporation to the public, through a stock offering.
Although various classes of stocks can be offered by a publicly held corporation, anyone who purchases stock becomes a shareholder in the company. As a shareholder of a company in Guyana, you will receive dividends each year from the stock and will generally have a right to vote for the board of directors. In this way, members are chosen to be on the boards of various companies locally.
When trying to become a shareholder for a company in Guyana, there are various steps which should be followed.
It is advised that research be done on the local company in which you plan to become a shareholder. You have many ways to research the company’s financial stability and security. You may request information directly from the company, research the company yourself online or use a local brokerage company to provide background information.
Also, obtain current pricing for shares of the company’s stock. This may also be accomplished by looking up the current price yourself on the company’s website or relying on a local brokerage firm to provide the information.
It is also important to determine how much of the company’s stock you can afford to purchase. Buying only one share of stock makes you a shareholder in the company; however, most people in Guyana invest in a company by purchasing more than one share.
Experienced Guyanese shareholders advise that potential stock owners should choose how they wish to purchase the shares, or stock, in the company. You may choose to use a traditional brokerage firm, a discount firm or an online broker.
A discount firm in Guyana may have information available, but you will need to research it yourself; however, the price will be less than a full-service firm. An online broker provides little information, but will also charge little to complete the purchase.
Once you have finalized the purchase of stock in the local company, you are officially a shareholder.
If a company is successful in growing its earnings and profit over the years then its share price is likely to rise, enabling you to record a capital gain if you decide to sell your shares. You also have the right to receive dividends, which are portions of a company’s profit that it decides to pay out to shareholders.
It is important to note that dividends are not guaranteed however, regardless of whether or not the company makes a profit. It is up to a company’s board of directors to decide on how big a dividend to pay, if at all.
Every company in Guyana has a hierarchical structure of rights that accompany the three main classes of securities that companies issue: bonds, preferred stock and common stock or ordinary shares.
The most commonly issued type of share are ordinary shares. Every publicly listed company in Guyana will have ordinary shares within its capital structure. Ordinary shares, also known as common shares, have a lower priority for company assets and only receive dividends at the discretion of the corporation’s management.
When a Guyanese company first lists on a stock exchange and conducts an initial public offering (IPO), it will decide how many shares to sell based on how much the owners want to raise, how much control they’re willing to relinquish and the price investors are willing to pay.
As an ordinary shareholder in a Guyanese company you are entitled to participate in annual general meetings and vote on: The election of the board of directors, Mergers, acquisitions or asset disposals, Capital increases and Director remuneration.
Ordinary shareholders may also be entitled to participate in a range of corporate actions, including share buy-backs, when companies buy shares back from investors, and the issue of new shares.
In reality, as a common shareholder, you are at the very bottom of the corporate food chain when a company liquidates; you are the corporate equivalent of a hyena that eats only after the lions have eaten their share.
During insolvency proceedings, it is the creditors who first get dibs on the company’s assets to settle their outstanding debts, then the bondholders get first crack at those leftovers, followed by preferred shareholders and finally the common shareholders. This hierarchy forms according to the principle of absolute priority.
But don’t be fooled, common shareholders in Guyanese companies are still the part owners of the business and if the business is able to turn a profit, then common shareholders gain.
The liquidation preference we described makes logical sense: shareholders take on a greater risk (they receive next to nothing if the firm goes bankrupt) but they also have a greater reward potential through exposure to share price appreciation when the company succeeds, whereas there are usually fewer preferred stocks held by a select few. As such, preferred stocks generally experience less price fluctuation.
Some of the companies which engage in the selling of shares in Guyana include; Banks DIH Limited, J.P. Santos and Company Limited, Caribbean Container Inc., Demerara Tobacco Company Limited, Sterling Products Limited, Demerara Distillers Limited, and Property Holdings Incorporated . These companies also have shareholders.