SHARES AND SHARE CAPITAL
Introduction: There are three main types of business organisation: (1) sole proprietorship (2) partnership (3) company. Each form of business organisation is required capital to carry on its business smoothly. On sole proprietorship the whole capital is contributed by sole proprietor in partnership the capital is invested by the partners and in case of company capital is invested by the public.
Meaning of share and share capital: A share is one unit into which the total share capital is divided. Share capital of the company can be explained as a fund or sum with which a company is formed to carry on the business and which is raised by the issue of shares. The amount collected by the company from the public towards its capital, collectively is known as share capital and individually is known as share. A share is not a sum of money but is an interest measured by a sum of money and this interest also contains bundle of rights and obligations contained in the contract i.e. Article of Association. Investment in the shares of any company is a basis of ownership in the company and the person who invest in the shares of any company, is known as the shareholder, member and the owner of that company. Definition: According to the section 2(46) of the Company’s Act 1956, share means a part in the share capital of the company and it also includes stock except where a distinction between stock and share capital is made expressed or implied.
Types of shares: As per the provision of section 85 of the Companies Act, 1956, the share capital of a company consists of two classes of shares, namely: Preference Shares Equity Shares