Shares as a Source of Owned Capital

The most familiar way a joint stock company raises owned capital is by issuing shares. Section 2(84) of the Companies Act, 2013 defines a share to mean a share in the share capital of a company, and includes stock. In practical terms, a company divides its total capital requirement into a large number of small, equal units, and each such unit is a share; the money value assigned to one such unit is the share's face value. Dividing capital this way lets a company invite even very small investors to subscribe — a person who cannot afford to fund an entire factory can still comfortably buy a handful of shares — and this is exactly why the share, as an instrument, made large-scale public fund-raising by joint stock companies possible in the first place. A person holding one or more shares of a company is called a shareholder, or a member of that company.

Every share, regardless of what kind it is, carries a common set of features that a Std 12 Secretarial Practice student should be able to state confidently. A share is the smallest unit into which the total share capital of a company is divided, and unless it has been dematerialised, it carries a distinctive number for identification. Ownership of a share is evidenced by a share certificate, issued under the company's common seal (or, today, by an equivalent electronic record where shares are held in demat form) — the share certificate is the document of title, since a share itself is intangible and cannot be physically handed over the way, say, a piece of land can. A share has value expressed in money in more than one sense: its face value, printed on the certificate and stated in the company's Memorandum of Association; its issue price, the price at which the company actually sells it, which may equal, exceed (at a premium) or occasionally be below (at a discount, subject to strict statutory conditions) the face value; and its market value, the price at which it is bought and sold on a stock exchange, which is set purely by the ordinary forces of demand and supply. A share confers on its holder certain rights — to receive dividend when declared, to inspect the company's statutory books, and to attend and vote at general meetings — and it is, in the hands of the holder, a movable property that is generally freely transferable in the manner the company's Articles of Association provide. …