Define ‘share’. What are the different types of shares that may be issued by a company

A share in a company is one of the units into which the total’ share capital of the company is divided. It is a fractional part of the capital Of the company,

which forms the basis of ownership and interests of a subscriber in the company. It is the interest of a shareholder in the compmy measured by a sum

of money for the purposes of liability and interest thereto. Section 2(46) of the Companies Act defines a share “as a share in the share Cal)ital of a

company, and includes stock except where u distinction hetween stock and share is expressed or implied.” But this

definition fails to explain the true nature of a share. In the case of Commissioner of Income-tax Vs. Standard Vacuum Oil Company, the Supreme Court of

India defined a share thus, “By a share in a comp:my is meant not any sum of money but an interest measured by a sum of

money and made UI) of diverse rights conferred on its holders hy the urticles of the company which constitute a contruct between him und the company.”

A share is a right to a specified amount of the share capital of a company carrying with it certain rights and liabilities while the company

is a going concern and in its winding up. When a shareholder has paid the amount of the shares held by him, the shares represent his proprietary interest

in the company. According to Section 82, the shures or other interests of any member in u compuny shull be movable l)rOI)erty, transferable in the

munner provided by the Articles of tbe ComlHmy. Shares are treated as “goods” under the Sale of Goods Act and they can be transferred to other

persons. The company issues a ‘share certificate’ to the shareholder. It may, however, be noted that a share certificate is not a negotiable instrument.

To sum-up, a share signifies the following:

(i) the interest of a shareholder in the company;

(ii) the right to receive dividend; .

(iii) the right to attend and vote at the meetings;

(iv) the right to share in the surplus assets of the company, if any, in

the event of the company being wound up;

(v) the liability of the shareholder in the company to pay calls on shares until fully paid up;

(vi) the right of the shareholder to transfer the share subject to the

Articles of Association;

Thus, a share is a bundle of rights as well as liabilities. The meaning

and the nature of share has been beautifully summarised as follows:

In the case of Vishwanathan Vs. East India Distilleries:

“Share is not a property like a log of wood or cloth etc. It is corporeal in nature and consists merely of a bundle of rights and obligations. Every one of these

rights and obligations are created by a statute or under a statutory instntment or power which also de(ines their extent, .scope, boundaries and incidents.”

Each share in a company has a nominal value and must bear a distinctive number. The requirement of distinctive number shall not apply to the shares

held with a depository. [Sec. 83 as amended by the Depository Related Laws (Amendment) Act 1987].