Advisory shares, also known as non-voting shares or Class B shares, are a type of stock that gives the holder the right to receive dividends and participate in the distribution of assets upon liquidation, but not the right to vote on matters related to the company. This means that the holders of advisory shares have a financial interest in the company but do not have a say in its management or direction. Advisory shares are typically issued to a select group of investors, such as family members or long-term advisors, and are intended to provide them with a stake in the company without diluting the voting power of the existing shareholders.
Advisory shares are similar to non-voting common shares, but they are often used in situations where the company wants to provide a financial stake to a specific group of people without giving them voting rights. They may be issued in addition to voting common shares, or as a separate class of stock altogether.
In accounting and financial statements, advisory shares are accounted for as part of the common shares outstanding. They are considered a liability in the balance sheet and the company can choose to account them as a liability or equity.
Overall, advisory shares can be a useful tool for companies to reward key advisors or family members with a stake in the company without diluting the voting power of the existing shareholders. It can also be a way to ensure that the company’s direction and management is controlled by those who are actively involved in its operations.
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