Page 124 - DCOM106_COMPANY_LAW

Unit 9: Share and Share Capital

The main difference between shares and stocks are: Notes
Share Stock
1. A share has a nominal value. A stock has no nominal value.
2. A share has a distinctive number that A stock bears no such number.
distinguishes it from other shares. (Except
where it is held under Depository mode.)
3. Shares can be issued originally to the A company cannot make an original issue
public. of stock. Stock can be issued by existing
company by converting its fully paid-up
shares.
4. A share may either be fully paid-up or A stock can never be partly paid-up. It is
partly paid-up. always fully paid-up.
5. A share cannot be transferred in fractions. A stock may be transferred in any
It is transferred as a whole. fractions.
6. All the shares are of equal denomination. Stock may be of different denominations.
7. Shares can be i ssued by any company, Stock can be issued only by a public
public or private. company limited by shares.

Self Assessment

Fill in the blanks:
1. Share is define in section ...................................

2. Section 83 requires that each share in a company having a share capital must be distinguished
by its ......................................
3. A common man uses ‘share’ and ‘share certificate’ to mean the ...............................

4. The share capital of a company is divided into a number of indivisible units of specified
amount. Each of such unit is called a ..............................
5. The term ................................. may be defined as the aggregate of fully paid-up shares of a
member merged into one fund of equal value.

9.2 Kinds of Shares

As mentioned above, a share carries certain rights and is subject to some obligations. A company
may issue all shares with same rights and obligations. However, it may issue different types of
shares with different rights and liabilities attached to them so as to satisfy the needs of different
types of investors. In such a case, the rights attached to the different classes of shares are called
“class rights”. The class rights normally relate to voting, dividends, return of capital or share in
the surplus assets of the company (the last two rights being available at the time of winding up)
and are invariably set out in the articles of the company.

The most common classes of shares are:
1. Preference;
2. Equity or Ordinary;
3. Deferred or Founders’.

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