Classified Shares

Classified shares are shares of a publicly-traded company that has different share classes, usually called Class A shares and Class B shares. A detailed description of the different classes of common stock and their specific features, is set out in a company's bylaws and charter.

Classified shares are an example of a complex capital structure. Companies with complex capital structures may have a combination of several different varieties of common stock classes, with each share class carrying different voting rights and dividend rates.

Voting privileges are the main reason companies create different share classes, in addition to dividend rights and liquidation preference. Preferred stock usually does not come with voting rights, but guarantees a fixed dividend, while common stock carries the right to vote for the board of directors at the annual general meeting.

To provide a better defense against hostile takeovers, Class A shares, with higher votes per share, are often issued to insiders like the company's top management team and directors. While Class A shares typically offer shareholders more benefits, retail investors should not be concerned about the different classes of stock, if the company is well-managed.