No -par stock , also known as “no-par stock”, “proportional stock” or “share stock”, does not record the amount on the face of the paper, but only indicates the number of shares or the proportion of the total share capital. The coupons are marked with “1 share”, “10 shares” or “1/10,000th of a share”.
The value of the shares without par value changes with the increase or decrease of the net assets of the issuing company. When the net assets of the issuing company increase, the stock price increases, otherwise, it decreases; the issuance price per share multiplied by the number of issued shares is the total issuance. In principle, the funds corresponding to the total amount of issuance should be fully included in the capital of the issuing company, and only in special circumstances can a small part of it be used as a capital reserve.
No-par stock dilutes the concept of par value, but still has intrinsic value, and it differs from denominated stock only in form. That is, they represent the proportion of shareholders’ investment in the company’s total capital, and shareholders enjoy equal shareholder rights. No-par stock has no par value, but has book value, and the value of no-par stock can increase with the increase or decrease of the property of the joint-stock company. Since no-denominated shares are not subject to denomination restrictions, they are highly liquid.
In the early 20th century, New York State was the first to pass a law allowing the issuance of no-parity shares, and other states and some countries in the United States followed suit. But company laws in many countries around the world, including China, do not allow such shares to be issued.
There are two types of no-parity shares: one is pure no-parity shares, that is, shares with no par value recorded on the face of the stock and in the “Articles of Association”; , but the amount per share is recorded in the “Articles of Association”.
Features of no-parity shares:
- The issue or transfer price is more flexible
Since no-par stock has no par value, it is not subject to the restriction of not being issued less than the par value, and the issue price can also fluctuate with the economic benefits of the company. When transferring, investors are not easily confused by the par value of the stock, but pay more attention to the analysis of the actual value of each share. It can improve the circulation quantity and circulation speed of stocks, and has stronger liquidity.
- Facilitate stock splits
If the stock has a denomination, it is necessary to go through the procedures for changing the denomination at the time of division. Because no-par stock is not bound by its par value, the company issuing the stock can more easily conduct a stock split.