A Company Share Is a Token of Ownership

A company share is actually a token of ownership, and each share represents one vote in the company. An individual shareholder can have many or a single one.

Since each share counts as one vote in the company, the more shares a shareholder has the more votes the shareholder has. How the votes are proportioned depends on the number of shares have been issued. Most companies do not issue too many shares because as the number of shares increases, so too does their liability. A shareholder may benefit from the company being sold and may also carry the right to dividend.

Although each share has a value, it has no bearing on the true value of the company or of the share. For example, a company that has a nominal capital of $1,000 represented by 1,000 shares may be sold for $200,000, in which case the nominal $1 shares would have an actual value each of $200.

A dividend is a payment that is made to the company's shareholders company proportionally with amount of shares that are owned. However, dividends are not automatically. It is up to the board of directors if a dividend will be paid in any particular year, and how much dividend will be paid for each share. This decision is usually based on the amount of the profit the company has shown. Anyone, including those who work for the company can hold shares in a company.

A private company is usually restricted from issuing shares to anyone except its debenture holders, its members, and to the staff. However, private arrangements can be made by which the company can issue shares to anyone it wants to. Shares that are held in a private limited company may only be transferred through the permission of the directors.

There are three types of share; Ordinary, preference, and differential share rights/value. An ordinary share of the company has no special restrictions or rights and may be divided into classes that have different values. A preference share usually carries a right that if there is a yearly dividends that are available for distribution, it will be paid preferentially before other classes.

Differential share rights/values are customized to the rights of ordinary shares to create dividend/differential voting rights. Normally, is accomplished by creating numerous shares from ordinary share stock, with each share class having rights allocated as necessary.

There is no minimum share capital for private limited companies and no maximum to any of the company's authorized share capital; However, a public limited company must at least have an authorized share capital of $50,000.

There is no requirement for a shareholder to pay for their shares in a private limited company. The company normally pays for those shares out of the company's own funds. If the shares are paid for and the company later liquidates, there can be no further claim against the shareholder. If the shares are not paid for and the company liquidates as a result of debt, the shareholders are required to pay the creditors the amount that each share is worth that they own.