Shares of Company

1. Chapter – VIII Shares of Company By SayyedMajidPirKhel Kardan University Kabul

2. This chapter contains • Introduction and definition of share • Types of share • Preference shares • Kinds of preference shares • Equity or Ordinary shares • Allotment of Shares • Transfer of shares

3. Introduction & Definition • We know that the money required by the company to start its business is raised from the public … • The money so raised is called the capital of the company … • Capital of the company is usually divided into different units of fixed amount .. • These units are called “shares” … • The person who holds the shares are called shareholders …

4. Contd … • Share is one of the ‘Units’ or ‘Parts’ into which capital of the company is divided. • It indicates a part or portion of ownership in the company … • It indicates the interests of shareholders (in the company) measured in terms of money (pecuniary interests) …

5. Definition of share contd … • It is a sum of rights and liabilities of its holder in the company. Thus, it entitles the share holder to • Receive certain portion of the Profit made by the company • Perform certain Obligations or Liabilities(in proportion to the numbers of shares taken) for company’s debt and loss and • Claim right in the assets(in proportion to the value of shares taken) when the company is to be wound up

6. Types of shares • The shares which can be issued by the company are of two types 1) Preference shares, 2) Equity or ordinary shares • Preference Shares: • Preference shares are those shares which have some preferential Rights over the other types of shares. • Such shares enjoy some priority over the equity shares.

7. Types of shares contd … • Preference shareholders enjoy mainly two types preferential rights which are as • A preferential rights as to the payment of dividends … • A preferential right as to the payment of capital in the event of winding up of the company …

8. Kinds of Preference Shares • Cumulative and non Cumulative: are those preference shares which are assured of the dividends every year even if there are no profits in a particular year. • Participating and non participating: are those shares entitled to participate in the surplus profit. • Convertible and non convertible: which can or can not be converted into equity shares. • Redeemable: are those shares the amount of which can be paid back by the company to its holders. The paying back of the capital is called redemption.

9. Types of shares contd … • Equity or ordinary Shares: • Equity or ordinary shares are those shares which are not preference shares… • Such shares do not enjoy any preferential rights… • For the purpose of dividend and repayment of capital, the equity shares come after the preference shares … • Generally Their rate of dividend is not fixed. It may very from year to year depending upon the profit of the company. • They get higher dividends when profit is huge and may get nothing if there are no profit.

10. Allotment of shares • We know that the prospectus issued by a company is the invitation to the public to apply for the shares of the company. • On the basis of this invitation, a person who applies to the company for its shares is called applicant and his application is called as ‘offer’ to thecompany for purchase of shares.

11. Allotment of shares contd … • When an application is accepted by the company it is called ‘allotment’. Such acceptance is communicated to the applicant by notice of allotment. • On the acceptance and reply to the allotment notice by allottee (applicant), his name is entered in the register of shareholders, and becomes the member of the company. A share certificate is also issued to him.

12. Shares Certificate • ‘Share certificate’ is a document issued by the company to its members specifying the shares held by them … • Any person whose name is entered in the register of the members of the company is entitled to receive share certificate … • A duplicate or renewed certificate can also be issued if it is proved that • The original has been lost or destroyed or • The original has been defaced and the same has been surrendered to the company.

13. Contents of share certificate • Share certificate may be in different form but a Valid Certificate must satisfy the following requirements • Name and registered office of the company • Name, address and occupation of the share holder • The nominal value and number of shares held by the shareholder, and also state the actual amount paid by him to the company

14. Contents contd … • Date of issue • Duly singed by authorized persons i.e. two directors or Attorney and secretary of the company affixed by a common seal of the company …

15. Transfer of shares • As it is one of the important characteristics of the company that its shares are freely transferable. Therefore it becomes the right of every shareholder whose name appears in the register of members of the company to transfer his shares. • Further more, share is a movable property and can be freely transferred by its owner (shareholder)

16. Transfer of shares contd … • Legal heirs or Representative of the deceased shareholder has also got the right to transfer his shares. • Generally the manner in which shares of the company can be transferred is prescribed in the Articles of Association, but the Articles can not absolutely restrict the right transfer of the shareholder.

17. thanks Sayyed Majid Pir Khail sayyedmajid@live.com