What are Shares?

Shares are the capital of a company divided into different units with a definite value. A share is a share in the share capital of a Company. Sec 2(46) of THE COMPANIES ACT,1956.

History
In Rome Private businesses called publicani sold shares to generate capital. The first company to issue shares of stock after the Middle ages was the Dutch East India Company in 1606.
Stocks Stock" is a general term used to describe the ownership certificates of any company in general. Shares Shares" refers to the ownership certificates of a particular company.

Kinds of Shares Equity shares

Equity : The part of something - asset, house or company- which you own. Equity shares: An equity share means a share of ownership in a company Characteristics:
  Owned capital Attached rights: Right to vote Right to attend meetings Right to inspect the books of accounts. Claim on Liquidation Dividend payment Risk bearing shares Transferable

   

Kinds of Shares Preference shares

Preference shares: have preferential rights over ordinary shares, as to payment of dividend & as to repayment of capital at the time of winding up of the Company. Characteristics :

Fixed rate of dividend. A preference shareholder is entitled to a dividend every year. Priority as to payment of dividend. Preference as to repayment of capital during liquidation of the Company. No voting rights. commonly issued by companies to institutions but not to the retail investor Not traded on the stock exchange

Kinds of Shares Deferred shares

Deferred shares : Deferred shares are those shares on which the payment of dividend and capital (at the time of winding up of a company) is made after money is paid in full on preference shares and equity shares. Characteristics:
       Dividend and capital on liquidation is paid after payment of dividend on equity & preference shares. Rate of dividend is not fixed. It depends upon the availability of profits & the discretion of the Board of the Directors. Entitled to a dividend only after a certain date or only if profits rise above a certain amount. Provide its holders with large dividend payouts only after all other classes of shareholders are paid. shares may not be redeemed as long as they are in the employment of the company. In the event that the company is doing well, the dividends can lead to a substantial nest egg for the employee and is a viable option for a retirement program. When the employee is no longer with the company, the shares are converted to preferred or equity shares at the common market value.

When are shares issued

IPO ( Initial Public Offering) : When a company issues shares for the first time.

FPO ( Follow on Public Offering) : A follow-on public offer (FPO) is also called further public offer. When a listed company comes out with a fresh issue of shares or makes an offer for sale to the public to raise funds it is known as FPO.

Share Certificate

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