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What Is The Meaning of Share

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10 views2 pages

What Is The Meaning of Share

Uploaded by

Biswaraj raul
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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What Is the Meaning Of Share?

 A share represents a unit of equity ownership in a company.


 Shareholders are entitled to any profits that the company may earn in the form of
dividends.
 They are also the bearers of any losses that the company may face.
 In simple words, if you are a shareholder of a company, you hold a percentage of
ownership of the issuing company in proportion to the shares you have bought.

Shares can be further categorized into two types. These are:

 Equity shares
 Preference shares

Equity shares:

 also referred to as ordinary shares.


 These stocks are documents that give investors ownership rights of the company.
Equity shareholders bear the highest risk.
 Owners of these shares have the right to vote on various company matters.
 Equity shares are also transferable and the dividend paid is a proportion of profit.

Equity shares are classified as per the type of share capital.

Authorised share capital:

 This is the maximum amount of capital a company can issue.


 It can be increased from time to time.
 For this, a company needs to conform to some formalities and also pay required fees
to legal entities.

Issued share capital:

 This is the portion of authorised capital which a company offers to its investors.

Subscribed share capital:

 This refers to the portion of issued capital upon which investors accept and agree.

Paid-up capital:

 This refers to the portion of the subscribed capital for which the investors pay.
 Since most companies accept the entire subscription amount at one go, issued,
subscribed, and paid capital are the same thing.
There are a few other types of shares.

Right share: These are the kind of shares a company issues to its existing investors. Such
stocks are issued to protect the ownership rights of existing shareholders.

Bonus share: Sometimes, companies may issue shares to their shareholders as a dividend.
Such stocks are called bonus shares.

Sweat equity share: When employees or directors perform their role exceptionally well,
sweat equity shares are issued to reward them.

Preference shares:

When a company is liquidated, the shareholders who hold preference shares are paid off
first. They also have the right to receive profits of the company before the ordinary
shareholders.

Cumulative And Non-Cumulative Preference Shares:

 In the case of cumulative preference shares, if a particular company doesn’t declare


an annual dividend, the benefit is carried forward to the next financial year.
 Non-cumulative preference shares don't provide for receiving outstanding dividends
benefits.

Participating/Non-Participating Preference Share:

Participating preference shares allow shareholders to receive surplus profits, after


payment of dividends by the company. This is over and above the receipt of
dividends.
Non-participating preference shares carry no such benefits, apart from the regular
receipt of dividends.

Convertible/Non-Convertible Preference Shares:

 Convertible preference shares can be converted into equity shares, after meeting the
requisite stipulations by the company’s Article of Association (AoA),
 while non-convertible preference shares carry no such benefits.

Redeemable/Irredeemable Preference Share:

 A company can repurchase or claim redeemable preference share at a fixed price


and time. These types of shares are sans any maturity date.
 Irredeemable preference shares, on the other hand, have no such conditions.

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