This matters for entrepreneurs raising capital and for anyone investing in a private company: the number of shares someone holds doesn't automatically tell you how much influence they have over the business. It's also a common structuring tool — a founder can bring in outside investors through preference shares to raise funding while retaining voting control through ordinary shares.
Source: Companies Act 71 of 2008
Frequently Asked Questions
Do preference shareholders get paid before ordinary shareholders?
Generally yes — preference shareholders typically have priority for dividend payments and for a return of capital if the company is liquidated, ahead of ordinary shareholders.
Can a company have more than one class of ordinary shares?
Yes — a company's Memorandum of Incorporation can create different classes of shares with different rights, including voting and non-voting ordinary shares.
Why would an investor accept shares with no voting rights?
In exchange for a more predictable financial return, like a fixed dividend, and priority in a liquidation, some investors are willing to trade control for financial security.