Action and participation are related concepts in the financial field. They are two concepts related to economic benefit, but they differ in several key aspects. The share is an issued title that represents a value of a fraction of the capital stock of an entity. They are transferable and belong to corporations, while the participation is issued by a limited company and they are not transferable without prior authorization.
What is Action?
A share is the market is a title issued by a corporation that represents the value of one of the equal fractions in which its capital is divided. The shares give the holder political rights, such as voting at the entity’s shareholders’ meeting, and economic rights, such as participating in the company’s profits.
They are transferable without any restriction. As an investment, they represent a variable income, since they do not have a fixed return established by contract.
There are different types of actions:
- Shares without nominal value.
- Preferred stock.
- Shares released.
- Limited Voting Shares.
- Industry stocks.
- Convertible shares.
- Shares with nominal value.
- Common or ordinary shares.
- Own action.
What is Participation?
It is a type of investment through which you participate in the benefits that a company obtains even when you do not own shares, that is, you do not participate in the capital.
Differences between action and participation
- Shares are proportional parts of the capital stock of a company. They are equity securities, so they depend on the profits obtained by the company. Whoever owns it is the owner of the company in proportion to the number of shares owned, having economic and political rights. They are self-financed, there is no interest to pay for them and they do not have a return period, they are issued by public limited companies and are freely transferable.
- A share shares most of the characteristics of a share with the difference that they are not freely transferable and are issued by limited companies.