Non influential security investments are the investments by companies or individuals in securities like debt, preference shares and equity in other companies. However, for these non influential securities, the investors have no influence in the running or decision making of the firms where they have invested. Each of the classification of the non influential securities has its own unique features that make it a non influential and non controlling investment.
Equity securities that are less than 20% of the voting stock are non influential securities. This means the investor does not have the influence to determine or change the operations in the company that has been invested in. Usually, voting in companies requires a majority vote of the total votes to make any decision. Investors who own less than 20% of the voting stock are minority voters. They do not have influence on their own unless they form mergers with other owners.
Debt securities are also non influential investment securities. Debt securities are those where an investor lends firm money, or on the agreement that the firm pays back after a specified period. The investors of these kinds of investments have no influence on the daily running of the companies where they have debt securities. The investors only look at the company’s accounting records to see its financial performance but have no power to make decisions. Debt security holders are always the first to be compensated by the firm in case the firm stops being a going concern.
Preference shares are also non influential securities. These are shares that are owned by investors who have no decision making power like in ordinary share owners. Preference share holders buy the shares at prices higher than those of ordinary shares, and they are not involved in the company’s operations. The preference share holders also benefit from the fact that they receive dividends and that they are not liable to the company’s assets and debt.
References
Charity Commission. (2007, May 13). CC15 - Charity Reporting and Accounting: The essentials. Retrieved January 13, 2012, from www.charitycommission.gov.uk: http://www.charitycommission.gov.uk/publications/cc15.aspx
Ehrhardt, M. C., & Brigham, E. F. (2008). Corporate Finance: A Focused Approach (3, illustrated ed.). London: Cengage Learning.
Vishwanath, S. R. (2007). Corporate Finance: Theory and Practice (SAGE, 2007 ed.). New York: SAGE.
