Common share refers to shares that have no special provision in the articles of incorporation with respect to the contents of the shares and refers to ordinary shares that can be freely traded on the share market. Under the Corporate Law, common shares are “shares not covered by the provisions listed in each item of Article 107, Paragraph 1, Article 107, Article 108 of the Company Law”. The right granted to shareholders is not limited at all. Most traded on Japanese share exchanges are traded on ordinary shares. A corporation can issue multiple types of shares, but common share is standard share. For shares other than ordinary shares, the right to receive dividends of profits, the priority shares that can be given priority to the right to receive the distribution of residual assets, the subordinated shares that are distributed later than the general shareholders, Subsidiary linked shares and so on. Ordinary shares are the standard shares of such shares. And ordinary shares are accompanied by voting rights at shareholders meeting, right to receive dividends. Companies may purchase common shares from the share market etc. by buying own shares. Common shares that companies acquire from the share market may be used to M & A other companies later.
Use common share for M & A of share exchange
In many cases, companies that underwent M & A have their acquirers under their umbrella by exchanging their shares. However, in that case the exchange ratio of the shares of each other will be determined by the ratio corresponding to each business scale. Companies that do M & A then may cancel the shares of the acquired company. Today, as globalization progresses, companies in developed countries are increasingly making M & A and other companies that can grow such as emerging countries. Therefore, companies in developed countries are increasingly pursuing M & A by exchanging their common share with the share of the other company. Until now, funds necessary for corporate M & A were often procured by issuing new shares, etc. However, issuing new shares or the like may cause share dilution. Then the share price of the share market will decline and it will cause inconvenience to existing shareholders. So, in order for M & A in the future, the company preliminarily buys its own shares in advance, and when M & A is decided, we will use the common share we bought at the time of purchase.