In this regard, in this article we will present the differences between the two, based on their brief definitions.
To begin with, shares are understood as the parts into which the initial capital of a given company is divided, where they serve to obtain capital quickly. Additionally, shares are titles issued by a company or company that represents the value of one of the equal fractions into which its capital stock is divided. In this way, the owner of a share, also called a shareholder, has political and economic rights through it that allow him to participate in decision-making and participate in the benefits that come from the company.
On the other hand, one of the fundamental characteristics of the shares is that they are transferable without any restriction, that is, either through sale, transfer or assignment. In addition, the shares are a variable income investment, since their return depends on the proper functioning of the company and, let’s say, they are the counterpart that the partner receives for the contributions he makes.
Likewise, the shares can have different values, highlighting the nominal value, which is the value of the share at the time of the creation of the company, the effective value, which is the market value of a share, that is, the price at which it is buy or sell and the theoretical value that is the price that the share can reach in the market based on the company’s capital and reserves. Finally, the shares are exclusive to Public Limited Companies.
Participations are understood as the percentage of the total capital of a company that an investor owns. In this way, they are proportional parts of the company’s capital that grant certain rights to their owners but that cannot be freely transferred or sold, since they have limitations regarding their purchase and sale, requiring an authorization from the rest of the owners for it. . Participations are issued by all types of associations, except Limited Companies, and their value is determined by the internal situation of the company, by the situation of the country in which the company is headquartered, and by economic factors.
It should be noted that the shares do not allow their holder the right to vote or decision-making power over the company. However, these allow an annual remuneration for the shares, which is fixed, regardless of whether the company grows or decreases its power.
As can be seen, shares and shares share certain similarities but differ based on certain elements. Therefore, the main differences between shares and participations can be summarized as:
- The shares are exclusive to Public Limited Companies while the participations are issued by all types of associations except Public Limited Companies.
- The shares are transferable without any restriction while the participations have certain limitations regarding their purchase and sale.
- Stocks are a variable income investment, since their return depends on the proper functioning of the company, while shares are a fixed annual income investment.