Define and distinguish between “share” and “stock”.Discuss their nature.
Ans. Share. -Furwell J.. defined ‘share’ in Borland Trust v. Steel Brothers and Co., as “the interest of a shareholder in the company, measured by a sum of money, for the purposes of liability in the first place and of interest in the second, but also consisting of a series. of mutual covenants entered into by all the shareholders inter se. A share is not a sum of money but is an interest measured in a sum of money and made up of various rights contained in the contract.”
Under the Act of 2013 (84) “share” means a share in the share capital of a company and includes stock.
A company may issue shares of different classes with special rights or restrictions.
Stock.-Stock is the fully paid-up shares, consolidated and divided for the purpose of convenient holding into different parts. The advantage to the company, in doing so is that it will then be no longer necessary for each share so converted to have a separate number. While the ordinary provisions that apply to shares will thereupon cease to apply to be so converted stock, the rights of the holder of the stock are in no way affected. The term “stock” merely denotes that the company has recognised the fact of the complete payment of the shares and that time has come when those shares can be assigned in fragments which obviously could not be done before. Thus, shareholder may hold Rs. 10 worth stock though bis shares had originally been of Rs. 100 each.
Difference between “stock” and “share”. The main differences between stock and share are:-
1. The word stock merely denotes that the company has recognised the fact of the complete payment of shares whereas share is the interest of a shareholder in the company measured by a sum of money.
2. Stock is the aggregate of fully paid-up shares. Thus stock is fully paid-up, while shares need not be fully paid-up.
3. A ‘share’ can be transferred as a whole, whereas stock is transferable in sums of any amount. But the minimum fraction can be fixed by the articles of association for the transfer of stock.
4. Each share must be distinguished by its appropriate number while there is no need of any such number in stock.
5. A company may issue shares of different classes with special rights or restrictions while there are no such provisions for stock.