Designation Could Be for a Partner. Bennie has
Post# of 96891
Posted On: 03/31/2016 12:03:24 PM
Designation Could Be for a Partner.
Bennie has mentioned that a partnership is almost a certainty. The designation could specify the benefits and limitations of preferred shares offered to a partner. There are benefits of having preferred shares, but one of the limitations of preferred stock is that the holder doesn't have voting rights. If the designation is for issuing preferred shares to a partner, it could be good news for NTEK, as we wouldn't want a partner with a significant stake in the company to have too much influence of the company's direction.
Certificate of Designation:
A certificate which contains a copy of the board resolution setting out the powers, designations, preferences or rights of a class or series of a class of stock of a corporation ( typically a series of preferred stock ) if they are not already contained in the certificate of incorporation of the corporation. The certificate of designation is filed as an amendment to the certificate of incorporation with the secretary of state of the corporation's state of organization.
The above graph was excerpted from this page: http://us.practicallaw.com/5-382-3318
Why would a company issue preferred stock?
Sometimes, a corporation wants to lure a certain class of investor; the kind who wants fixed, scheduled payments. To do that the company can issue bonds, which come with their own disadvantages. When a company authorizes a bond issue it could be declaring that it’s desperate for cash, which can scare stock investors off. How to offer equity while simultaneously guaranteeing investors a certain regular payment? Through the magic of preferred stock, which is sort of an amalgam of bonds and common stock. (For more, see: A Primer on Preferred Stock.)
The differences between preferred stock and common stock are few but crucial. Preferred shareholders indeed receive dividend payments: the dividends are a selling feature, intrinsic to the security. Whereas with common stock, corporations are under no obligation to offer dividends. (For more, see: What is the Difference Between Preferred Stock and Common Stock?)
No Voting Rights
Most things in life involve a tradeoff, and preferred stock is among them. From an investor’s perspective, the one primary disadvantage to preferred stock is that its holders don't have voting rights. Just from the name, you’d figure preferred stockholders would receive, well, preferential treatment. But when a company elects board members, it’s the common stockholders who do the electing while the preferred stockholders sit on the sidelines, disenfranchised. (For more, see: Know Your Rights as a Shareholder.)
The previous graphs was excerpted from this page:
http://www.investopedia.com/articles/active-t...-stock.asp
Bennie has mentioned that a partnership is almost a certainty. The designation could specify the benefits and limitations of preferred shares offered to a partner. There are benefits of having preferred shares, but one of the limitations of preferred stock is that the holder doesn't have voting rights. If the designation is for issuing preferred shares to a partner, it could be good news for NTEK, as we wouldn't want a partner with a significant stake in the company to have too much influence of the company's direction.
Certificate of Designation:
A certificate which contains a copy of the board resolution setting out the powers, designations, preferences or rights of a class or series of a class of stock of a corporation ( typically a series of preferred stock ) if they are not already contained in the certificate of incorporation of the corporation. The certificate of designation is filed as an amendment to the certificate of incorporation with the secretary of state of the corporation's state of organization.
The above graph was excerpted from this page: http://us.practicallaw.com/5-382-3318
Why would a company issue preferred stock?
Sometimes, a corporation wants to lure a certain class of investor; the kind who wants fixed, scheduled payments. To do that the company can issue bonds, which come with their own disadvantages. When a company authorizes a bond issue it could be declaring that it’s desperate for cash, which can scare stock investors off. How to offer equity while simultaneously guaranteeing investors a certain regular payment? Through the magic of preferred stock, which is sort of an amalgam of bonds and common stock. (For more, see: A Primer on Preferred Stock.)
The differences between preferred stock and common stock are few but crucial. Preferred shareholders indeed receive dividend payments: the dividends are a selling feature, intrinsic to the security. Whereas with common stock, corporations are under no obligation to offer dividends. (For more, see: What is the Difference Between Preferred Stock and Common Stock?)
No Voting Rights
Most things in life involve a tradeoff, and preferred stock is among them. From an investor’s perspective, the one primary disadvantage to preferred stock is that its holders don't have voting rights. Just from the name, you’d figure preferred stockholders would receive, well, preferential treatment. But when a company elects board members, it’s the common stockholders who do the electing while the preferred stockholders sit on the sidelines, disenfranchised. (For more, see: Know Your Rights as a Shareholder.)
The previous graphs was excerpted from this page:
http://www.investopedia.com/articles/active-t...-stock.asp
(4)
(0)