Features of Shares | Meaning, Types, and Characteristics of shares

Features of Shares

Features of Shares

Definition of Shares

The term share is defined b Section 2 (84) of the Companies Act 2013, ‘Share means a share in the share capital of a company and includes stock’.

A share is a unit by which the share capital is divided. The total capital of company is divided into small parts and each part is called share and the value of each part/unit is known as face value. A share is a small unit of capital of a company. It facilitates the public to subscribe to the capital in a smaller amount.

A person can purchase any number of shares as he wishes. A person who purchases shares of a company is known as a shareholder or a member of that company.

The amount of authorized capital, together with the number of shares in which it is divided, is stated in the Memorandum of Association but the classes of shares in which the company’s capital is to be divided, along with their respective rights and obligations, are prescribed by the Articles of Association of the company. As per Section 86 of The Companies Act, a company can issue two types of shares
(1) Preference shares, and
(2) Equity shares (also called ordinary shares).

Features of Shares:

1) Meaning: Share is the smallest unit in the total share capital of a company.

2) Ownership: The owner of the share is called a shareholder. It shows the ownership of a shareholder in the company.

3) Distinctive Number: Unless dematerialized, each share has a distinct number for identification. It is mentioned in the Share Certificate.

4) Evidence of title: A share certificate is issued b a company under its common seal. It is a document of title of ownership of shares. A share is not any visible thing. It is shown by share certificate or in the form of Demat share.

5) Value of a Share: Each share has a value expressed in terms of money.
There may be :
(a) Face value: This value is written on the share certificate and mentioned in the Memorandum of Association.
(b) Issue price: It is the price at which company sells its shares.
(c) Market Value: This value of share is determined by demand and supply forces in the share market.

6) Rights: A share confers certain rights on its holder such as right to receive dividend, right to inspect statutory books, right to attend shareholders’ meetings, and right to vote at such meetings, etc.

7) Income: A shareholder is entitled to get a share in the net profit of the company. It is called dividend.

8) Transferability: The shares of a public limited company are freely transferable in the manner provided in the Articles of Association.

9) Property of Shareholder: Share is a movable property of a shareholder.

10) Kinds of Shares: A company can issue two kinds of shares :
(a) Equity shares.
(b) Preference shares.

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