Today, purchasing stocks online is as commonplace as sipping a glass of water. It’s become an everyday activity – you invest in stocks and trade them at your convenience.

The world of stock trading has opened its doors wide, making it incredibly easy for anyone to participate. The question we seldom ponder is, why is it so? The process of buying and selling stocks appears straightforward, yet do we truly grasp the fact that these stocks represent ownership in a company?

This Article Explores Stockholder Rights Under Croatian Law.

→ How to purchase stocks?

There are many ways to purchase stocks, we can categorize them into three main categories.

  • Stock Exchange Inc.
  • Brokers
  • Online platforms/brokers

Stock Exchange Inc

All countries have the main stock exchange company like New York Stock Exchange, in Croatia is Zagreb Stock Exchange, Inc. As a physic person, you can’t be a member of the Zagreb Stock Exchange, Inc. and you can’t freely buy or sell stocks. You can buy or sell securities on the Zagreb Stock Exchange only through a broker. The broker is employed by an investment company, which must be a member of the Exchange. In the exchange regulations, in Articles 6 to 11, the entities eligible to become members of the exchange are clearly described. The most common members are banks, in Croatia it will be:

All members you can find here: Popis članova (zse.hr)

What Does a Broker Do for You?

A broker executes your order, meaning they buy or sell securities on your behalf. The investment company is obligated to act fairly, justly, and professionally in the best interests of the client and provide the client with all necessary information.

Withdraw orders and purchase orders are the two most important orders.

There are three main things that a buy/sell order should have: price, quantity, and duration.

Regarding the withdrawal order, the investor can initiate a fund withdrawal request at any time he wants. The monetary funds are transferred to the current account. If you have just sold shares and require immediate funds, you should be aware that funds are disbursed to the current account on the second business day following the transaction execution.

→ Stocks in Croatian Company Law

      Rights and Types

Stocks, or shares, are a fundamental aspect of corporate governance, allowing individuals to participate in the ownership and decision-making of a company. Croatian Company Law outlines the nature of stocks and the establishment of companies with shares.

According to Article 167, shares can be categorized as ordinary and preferred based on the rights they confer to the shareholders.

Most of the shares are ordinary shares, and every ordinary share offers the same rights to shareholders.

Ordinary shares grant their holders:

  • The right to vote in the company’s general assembly,
  • The right to receive a portion of the company’s profits (dividend),
  • The right to receive a portion of the remaining liquidation or bankruptcy estate of the company.

On the other hand, Preferred Shares are issued in a smaller quantity, as they provide their shareholders with specific, and indeed privileged, rights that not every shareholder possesses.

Preferred shares provide their holders with certain privileged rights, such as the right to receive dividends in a predetermined monetary amount or as a percentage of the nominal value of the share. They also hold priority in dividend payments, receiving their share before ordinary shareholders. Preferred shareholders also have a claim to the remaining liquidation or bankruptcy estate and other rights as stipulated by law and the company’s statute.

There are two types of preferred shares: Preferred shares can be cumulative or participating.

Holders of cumulative preferred shares, in accordance with the share issuance decision, have the right to receive accumulated unpaid dividends before dividends are distributed to ordinary shareholders.

Holders of participating preferred shares, in accordance with the share issuance decision, have the right to receive both a specified dividend and a share of the dividend distributed to ordinary shareholders.

Because of these privileged rights, companies do not issue them in large quantities.

Shares that confer the same rights belong to the same class of shares, or share category.

Voting Rights

The company can issue shares with or without voting rights.

Each share carries the right to vote in the company’s assembly.

Non-voting shares are only preferred shares, and they may be issued without voting rights. The total amount of the registered capital related to such shares cannot exceed half of the company’s registered capital.

Issuing shares with different voting rights for the same amount of registered capital is prohibited by law.

→ Conclusion

In conclusion, shares play a pivotal role in defining the relationship between a company and its shareholders. Ordinary and preferred shares offer distinct rights to their holders, reflecting their role in the company’s governance and profitability. It’s essential for potential investors and shareholders to understand the implications of the type of shares they hold, as these rights can significantly impact their involvement in the company’s affairs.

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