Meaning of ‘Share’

The company’s capital is divided into small units called shares. Every business needs capital, and issuing shares is the most common method for raising it. In this method, the company divides its capital into shares and issues them as securities. People who buy shares are called shareholders.  They earn profits according to the number of shares they own.

Importance of Share:

Shares play a significant role in the overall development of individuals and nations. Capital is essential for establishing and operating any business or industry, and it can be raised through shares. In other words, shares are crucial for establishing large industries. Countries like the United States and Japan have developed their industries through shares. The importance of shares can be summarized as follows:

1.It encourages saving habits.

2.It helps invest small scattered savings in productive sectors.

3.It contributes to the overall development of the country.

4.It supports industrial development.

5.It helps people gain better financial management knowledge.

6.It contributes to the development of the country’s financial sector.

7.It provides income generation opportunities.

 

Types of Share:

Shares are generally of two types:

1.Preference Shares: These shares give investors priority over ordinary shareholders in receiving dividends and capital return. Preference shareholders receive a fixed return as agreed in the contract and do not bear the capital risk. Such shares are preferred by people who do not want to take investment risks. Preference shareholders do not have voting rights or the right to participate in general meetings.

 

2.Ordinary Shares: After paying dividends to preference shareholders, the remaining profits are distributed among ordinary shareholders. These shares are riskier, so only people willing to take risks invest in them. Ordinary shareholders have the right to vote and participate in general meetings.

Documents Required to Fill up the Form of Share:

To buy or fill a share form, one must first open a DEMAT (Dematerialized) account. A DEMAT account is a system where physical share certificates are stored electronically. It is the process of converting physical certificates into electronic form. Anyone, whether they own shares or not, can open a DEMAT account. After opening the account, the investor is given a 16-digit DEMAT account number. Just like depositing money into a bank account, shares are deposited into a DEMAT account.

The following are required to open a DEMAT account:

1.A bank account

2.A certified copy of citizenship

3.Permanent address details

4.A three-generation family record

5.Contact number

6.A recent passport-size photo

7.Signature