Shares

 

Meaning of Share

The capital of a company is divided into certain indivisible units of a fixed amount. These units are called shares. According to the Act “ ‘Share’ means a share in the share capital of a company, and includes stock except where a distinction between stock and share is expressed or implied.”36 Share may also be defined as ‘Interest in the company entitling the owner thereof to receive proportionate parts of profits, if any, and of a proportionate part of the assets of the company upon liquidation.

 

Meaning of Share Certificate

A share certificate is issued by a company under its common seal. It specifies the shares held by a member and is prima-facie evidence of the title of member to the shares. Each share is distinguished by an appropriate number.

 

Types of Shares

There are two types of shares:

 

a) Preference share.

b) Equity or ordinary share. This type of share can be further divided into:

i. With voting rights; or

ii. With differential right as to dividend, voting or otherwise.

 

Characteristics of Preference Shares

Preference shares have two characteristics:

a) They have preferential rights to be paid dividend during the life time of company.

b) They have preferential right to the return of capital when the company goes into liquidation.

 

 

 

 

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