Chapter Four: CAPITAL, SHARE AND SHAREHOLDERS

 DEFINITION OF CAPITAL
Wealth in the form of money or other assets owned by a person or organization for a particular
purpose such as starting a business or investing.
For example, Mr. A has invested taka 50 lakh for starting a new business.

 DEFINITION OF SHARE CAPITAL

Share Capital is the money invested in a company by the shareholders. It is a long-term source
of finance.
For example, A company with 1000 shares of taka 1 has an issued share capital of taka 1000.

 TYPES OF SHARE CAPITAL

The term ‘capital’ in connection with company formation may can any one of the following:
1. Nominal Share Capital: Nominal share capital is the total face value of the share which the
company is authorized to issue by its memorandum of association.
2. Issued Share Capital: Issued Capital is that part of authorized capital which is actually
offered to the public for sale.
3. Subscribed Share Capital: Subscribed Share Capital is that part of issued capital which is
taken up and accepted by the public.
4. Paid-up Share Capital: Paid-up Share Capital is among of money actually paid by the
subscribed or credited as so paid.
5. Uncalled Share Capital: The unpaid portion of the subscribed capital is called uncalled share
capital.

 DEFINITION OF SHARE
A unit of ownership that represents an equal proportion of a company’s capital. (Share –
Business Dictionary - http://www.businessdictionary.com/definition/share.html)

 FEATURES OF SHARE
The main characteristics of share are stated below:
1. A share is not a sum of money but is an interest measured in a sum of money and made up
of various rights.
2. A share is an interest having a money value and made up of diverse rights specified under
the Articles of Association.
3. The holder of a share has certain rights, duties and liabilities, as stated I the companies Act
and in the Memo and Articles of Association.
4. A share is transferable and heritable subject to regulations framed in the Articles of
association of the company.
5. The shares or other interest of a member in a company is movable property, transferable in
the manner provided by the Articles of the Company.
 6. The shares must be numbered so as to distinguish them from one another.

 DEFINITION OF SHARE CERTIFICATE

A share certificate is a written document signed on behalf of a corporation, and serves as legal
proof of ownership of the number of shares indicated. (Share Certificate – Investopedia -
http://www.investopedia.com/terms/s/share-certificate.asp)

 DEFINITION OF SHARE WARRANT

A freely transferable certificate indicating that the bearer is entitled to specified shares of stock.
(Share Warrant – Merriam-Webster - http://www.merriam-
webster.com/dictionary/share%20warrant)

 DIFFERENCES BETWEEN SHARE WARRANT AND SHARE CERTIFICATE

The differences between share warrant and share certificate are given below:
Points Share Warrant Share Certificate
1. Registrar of A bearer of share warrant is not A bearer of share certificate is
Company entered in the Registrar of entered in the Registrar of Members
Members of the company. of the company.
2. Transferability A share warrant can easily be A share certificate requires certain
transferred by mere delivery. procedures and stamp duty for the
transfer.
3. Time of It does not require time for It consumes time for transfer.
Transfer transfer.
4. Negotiable A share warrant is negotiable A share certificate is not negotiable
instrument. instrument.
5. Coupon Coupons for dividing may be No coupons shall be attached with
attached with share warrant. share certificate.
6. Post of Share warrants cannot qualify a Share certificate held by a person can
Directorship person to become director. qualify him to become director.
7. Voting Right A holder of share warrant has no A holder of share certificate has right
right to vote, no right to sit in the to vote, right to sit in the meeting etc.
meeting.

 DEFINITION OF SHAREHOLDERS
An individual, group or organization that owns one or more shares in a company and in whose
name the share certificate is issued. (Shareholder – Business Dictionary -
http://www.businessdictionary.com/definition/shareholder.html)

 DEFINITION OF STOCK
The conversion of the fully paid up shares of a member into a single fund is known as stock.
 DIFFERENCES BETWEEN MEMBER AND SHAREHOLDER (Member vs
Shareholder – Key Differences - http://keydifferences.com/difference-
between-members-and-shareholders.html)
The differences between share warrant and share certificate are given below:
Points Member Shareholder
1. Meaning A person whose name is entered in The person who owns the shares of a
the register of member, is the company is known as shareholder.
registered member of the company.
2. Share Warrant The holder of a share warrant is not The holder of a share warrant is a
a member. shareholder.
3. Company Every company must have a The company limited by share can
minimum number of members. have shareholders.
4. Memorandum The person who signs the After signing the memorandum, a
memorandum of association with person can be a shareholder only
the company becomes a member. when the shares are allotted to him.

 DIFFERENCES BETWEEN SHARE AND STOCK

The differences between share and stock are given below:
Points Share Stock
1. Meaning A unit of ownership that represents The conversion of the fully paid up
an equal proportion of a company’s shares of a member into a single fund
capital. is known as stock.
2. Identification A share signifies one unit of stock, Stock represent ownership in a
which can be bought and sold by corporation.
investors.
3. Buying and Share can be bought and sold by Companies sell stock as a way to raise
Selling investors. operating capital for their business.
4. Paid-up Value Shares can be partly or fully paid Stock can only be fully paid up.
up.
5. Definite A share have a definite number A stock does not have such number.
Number known as distinctive number.