Meaning of Share
Share is the smallest unit of the total capital of a joint-stock company. It is sold to the public so as to raise cash for the business. It can also be said as the smallest unit of company ownership. The person who purchases this smallest unit and provides funds to the company is called a shareholder. The shareholders are the actual owners of such companies. The shareholders are bound to get a dividend in return for investing in such shares. Precisely, a share is the smallest part of company capital purchased and held by people in expectation of some return.
There are two types of share: Equity Share and Preference Share. Equity is or ordinary share refers to that type of share whose rate of dividend varies every year. The dividend to such shareholders is payable only at the condition of profit, not loss. These shareholders can actively involve in company management and possess voting right too. Equity shareholders are the actual owners of the company. ON the other hand, a preference share refers to that type of share on which the rate of annual dividend is fixed. The holders of such shares have a preference right over equity shareholders. They get dividends despite the level of profit or losses of the company. Preference shareholders have no voting or active involvement in company management rights. Companies can issue any of the two or both types of share as per its need and prevailing legal provisions.
Key Features of Share
- Share is the part of total company capital
- It shows the ownership of its holder in the company
- It is issued in terms of the certificate, either in paper or digital form
- It consists of face value, issued value (issued at par or premium or discount) and market value
- It is a moveable and transferable property
- It can be listed in the stock market and traded on the basis of its demand and supply as well as other market factors
- The holder of shares hasthe right to get a dividend, inspect books of the company, attend shareholder’s meetings etc.
difference Between Equity Share and Preference Share
| Basis of Difference | Equity Share | Preference Share |
| Rate of Dividend | The rate of dividend varies every year | The rate of dividend is fixed at the time of its issue |
| Preference Right | No preference right at the time of sharing company profit | Preference right over equity shareholders while sharing the profit |
| Liquidation of Company | Paid at last while liquidating a company | Paid with preference before equity shareholders while liquidation of the company |
| Voting Right | Has voting right to choose a board of directors of the company | No voting right at all |
| Participation Right | Equity shareholders can take part in company management and control | No participation right |
| Sales to Company | Sales to a company are possible only at the time of buy back of shares | Sales to a company are possible only after the expiry of a certain time period |
| Issue | Equity shares are generally issued to individuals | Mostly issued to financial institutions |
| Trade-in Stock Market | Listed and traded in the stock market | No trade-in stock market |
