Summary
Highlights
The lesson introduces shares as pieces of a company, specifically for an NV (public limited company) where shares are freely tradable. Shareholders are co-owners and have rights to influence company decisions through the General Meeting of Shareholders (AVh). Each share has a nominal value (e.g., 5 euros) and can offer dividends, which are a portion of the profit.
Shares are divided into ordinary and preference shares. Ordinary shares are publicly traded on the stock exchange and offer some influence. Preference shares (voor voorkeurs aandelen) grant more decision-making power and priority in profit distribution (dividends). Companies, especially NVs, often keep preference shares with founders or their families to maintain control over the company's direction.
The total value of all shares a company can issue is called the 'maatschappelijk aandelenkapitaal' (authorized share capital). The 'ongeplaatst aandelenkapitaal' (unissued share capital) represents shares not yet sold, while the 'geplaatst aandelenkapitaal' (issued share capital) represents shares that have been sold. Only issued share capital affects the total balance sheet, as money has been received for these shares.
Companies issue shares to raise capital for investments. The price at which shares are sold is called the 'emissiekoers' (issue price). If shares are sold for more than their nominal value (e.g., 7 euros for a 5-euro nominal share), the difference is called 'agio' (share premium). This agio is recorded on the balance sheet as 'agioreserve' (share premium reserve), alongside the issued share capital and bank funds received.
After initial issuance, shares are traded on the stock exchange. The 'beurskoers' (market price) is determined by supply and demand, and it often fluctuates between the nominal value and the intrinsic value of the share. A 'koerswinst' (capital gain) is made when a shareholder sells their shares for more than they paid.
The intrinsic value of a company represents its true worth. It's calculated by subtracting total liabilities (vreemd vermogen) from total assets (activa). The intrinsic value per share is then the company's intrinsic value divided by the number of issued shares. This explains why people might be willing to pay more than the nominal value, as the actual ownership value is higher.
People invest in shares for various reasons: to gain influence or participation in the company (zeggenschap), to earn capital gains (koerswinst) from rising share prices, or to receive dividends (winstuitkering) as a share of company profits.
Dividends are a portion of the company's profit distributed to shareholders. They are calculated as a percentage of the nominal value of the share (e.g., 8% of 5 euros = 40 cents per share). Profit distribution follows a specific order: first, corporate tax (vennootschapsbelasting) is paid, then dividends are distributed, and any remaining profit is reserved for future investments or savings (reservering).
Dividends can be paid out in cash (cash dividend), directly deposited into shareholders' accounts. Alternatively, companies can issue stock dividends (stockdividend), where shareholders receive new shares instead of cash. This is a common strategy for companies wanting to retain cash for investments. Dividend tax (dividendbelasting) of 15% is levied on the total dividend amount, and it must be paid in cash.
The distribution of profit (tax, dividends, and reserves) significantly impacts a company's balance sheet. Corporate tax payments reduce bank assets. Cash dividends also reduce bank assets. Stock dividends, however, reduce retained earnings (winst na belasting) and increase issued share capital, effectively shifting value on the equity side of the balance sheet without affecting cash assets. Remaining profit is moved to general reserves.
To ensure consistent dividend payouts, even in lean years, companies might adopt a dividend stabilization policy. This involves creating a 'dividend reserve' during profitable years to draw from when profits are low. However, issuing stock dividends increases the issued share capital, which means higher dividend payouts in subsequent years, making stabilization more challenging. Therefore, companies aiming for stabilization might opt for minimal or no stock dividends.