• Products
    Investment Suite
    Stocks
    Mutual Funds
    Future and Options
    IPO
    Exchange Traded Funds
    Commodity
    Stockcase (Stock Baskets)
    Non Convertible Debentures
    Sovereign Gold Bond
    Exclusive
    NRI Account
    Corporate/HUF Trading Account
    Private Client Group
    Features
    SipIt
    MTF
    Investment Suite
    Exclusive
    Features
    Stocks
    Mutual Funds
    Future and Options
    IPO
    Exchange Traded Funds
    Commodity
    Stockcase (Stock Baskets)
    Non Convertible Debentures
    Sovereign Gold Bond
    NRI Account
    Corporate/HUF Trading Account
    Private Client Group
    SipIt
    MTF
  • Platform
    Trading Platforms
    Kotak Neo App & Web
    Nest Trading Terminal
    NEO Trade APIs
    Trade From Charts
    Features and Tools
    MTF
    Securities Accepted as Collateral
    Margin Requirements
    Equity Screeners
    Payoff Analyzer
    Calculators
    SIP Calculator
    Lumpsum Calculator
    Brokerage Calculator
    Margin Calculator
    MTF Calculator
    SWP Calculator
    CAGR Calculator
    Simple Interest Calculator
    ELSS Calculator
    Step up SIP Calculator
    All Calculators
    Trading Platforms
    Features and Tools
    Calculators
    Kotak Neo App & Web
    Nest Trading Terminal
    NEO Trade APIs
    Trade From Charts
    MTF
    Securities Accepted as Collateral
    Margin Requirements
    Equity Screeners
    Payoff Analyzer
    SIP Calculator
    Lumpsum Calculator
    Brokerage Calculator
    Margin Calculator
    MTF Calculator
    SWP Calculator
    CAGR Calculator
    Simple Interest Calculator
    ELSS Calculator
    Step up SIP Calculator
  • Pricing
  • Research
    Research Calls
    Long Term calls
    Short Term calls
    Intraday calls
    Derivatives calls
    Pick of the week
    Top Monthly Picks
    Stock Research Recommendations
    MTF Stock Recommendations
    Research Reports
    Fundamental Research Report
    Technical Research Report
    Derivative Research Report
    Research Calls
    Research Reports
    Long Term calls
    Short Term calls
    Intraday calls
    Derivatives calls
    Pick of the week
    Top Monthly Picks
    Stock Research Recommendations
    MTF Stock Recommendations
    Fundamental Research Report
    Technical Research Report
    Derivative Research Report
  • Market
    Market Movers
    Share Market Today
    Top Gainers
    Top Losers
    Stocks
    Large Cap
    Mid Cap
    Small Cap
    Indices
    Nifty 50
    Bank Nifty
    FinNifty
    Nifty Midcap India
    VIX
    All Indices
    Mutual Funds
    SBI Mutual Funds
    HDFC Mutual Funds
    Axis Mutual Funds
    ICICI Prudential Mutual Funds
    Nippon India Mutual Funds
    All AMC's
    IPO
    Upcoming IPO
    Current IPO
    Closed IPO
    Recently Listed IPO
    Tata Capital IPO
    Amanta Healthcare IPO
    Quarterly Results
    Jindal Steel's Q1 FY 2025-26 Quarterly Results
    SRI LOTUS DEVLPRS N RTY L's Q1 FY 2025-26 Quarterly Results
    Aeroflex Neu's Q1 FY 2025-26 Quarterly Results
    PVP Ventures' Q1 FY 2025-26 Quarterly Results
    Market Movers
    Stocks
    Indices
    Mutual Funds
    IPO
    Quarterly Results
    Share Market Today
    Top Gainers
    Top Losers
    52 Week High
    52 Week Low
    Volume Shockers
    Large Cap
    Mid Cap
    Small Cap
    State Bank of India
    Reliance Industries Ltd
    HDFC Bank Ltd
    Infosys Ltd
    Tata Consultancy Services Ltd
    Hindustan Unilever Ltd
    ITC Ltd
    IRCTC
    NSE
    Nifty 50
    Bank Nifty
    FinNifty
    Nifty Midcap India
    VIX
    BSE
    Sensex
    BSE Bankex
    BSE Small Cap
    BSE Mid Cap
    BSE 100
    Indian Indices
    Global Indices
    Gift Nifty
    S&P
    Nikkei Index
    Hong Kong Index
    KOSPI Index
    Global Indices
    AMC's
    SBI Mutual Funds
    HDFC Mutual Funds
    Axis Mutual Funds
    ICICI Prudential Mutual Funds
    Nippon India Mutual Funds
    Schemes
    Parag Parikh Flexi Cap
    SBI Small Cap Fund
    SBI Contra Fund
    Nippon Small Cap Fund
    ICICI Pru Technology Fund
    Upcoming IPO
    Current IPO
    Closed IPO
    Recently Listed IPO
    Tata Capital IPO
    Amanta Healthcare IPO
    Sugs Lloyd Ltd
    Snehaa Organics Ltd
    Abril Paper Tech Ltd
    Rachit Prints Ltd
    Amanta Healthcare Ltd
    Optivalue Tek Consulting Ltd
    Goel Construction Company Ltd
    boAt IPO
    Jindal Steel's Q1 FY 2025-26 Quarterly Results
    SRI LOTUS DEVLPRS N RTY L's Q1 FY 2025-26 Quarterly Results
    Aeroflex Neu's Q1 FY 2025-26 Quarterly Results
    PVP Ventures' Q1 FY 2025-26 Quarterly Results
    NDR INVIT Trust's Q1 FY 2025-26 Quarterly Results
    Jaiprakash Associates' Q1 FY 2025-26 Quarterly Results
    Alps Industries' Q1 FY 2025-26 Quarterly Results
    Brightcom Group's Q1 FY 2025-26 Quarterly Results
    Visa Steel's Q1 FY 2025-26 Quarterly Results
    Coffee Day Enterprises' Q1 FY 2025-26 Quarterly Results
    Supreme Holdings & Hospitality's Q1 FY 2025-26 Quarterly Results
    Kavveri Defence & Wireless Technologies' Q1 FY 2025-26 Quarterly Results
  • Learn
    Stockshaala
    Basics of Stock Market
    Introduction to Fundamental Analysis
    Introduction to Technical Analysis
    Derivatives, Risk management & Option Trading Strategies
    Personal Finance
    Resource
    Market Ready
    Kotak Insights
    Infographic
    Podcast
    Webinars
    Youtube Channel
    Investing Guide
    Demat Account
    Trading Account
    Share Market
    Intraday Trading
    IPO
    Mutual Funds
    Events
    Budget 2025
    Muhurat Trading
    Share Market Holiday
    Market Outlook 2025
    Stockshaala
    Resource
    Investing Guide
    Events
    Basics of Stock Market
    Introduction to Fundamental Analysis
    Introduction to Technical Analysis
    Derivatives, Risk management & Option Trading Strategies
    Personal Finance
    Market Ready
    Kotak Insights
    Infographic
    Podcast
    Webinars
    Youtube Channel
    Demat Account
    Trading Account
    Share Market
    Intraday Trading
    IPO
    Mutual Funds
    Budget 2025
    Muhurat Trading
    Share Market Holiday
    Market Outlook 2025
  • Partner
    Business Associates
    Kotak Connect Plus
    Startup connect
    Business Associates
    Kotak Connect Plus
    Startup connect
  • Support
    FAQs
    Circulars
    Bulletins
    Contact Us
    Forms Download
    Get your Statement
    FAQs
    Circulars
    Bulletins
    Contact Us
    Forms Download
    Get your Statement
  • News

What is a Share: Meaning and Types of Shares

  •  4m
  •  1,476
  • Updated 14 Sep 2023

When delving into stock market trading and finance, the term "share" takes center stage. Shares are fundamental units of ownership in a company, granting individuals a stake in its assets, profits, and decision-making processes. They play an important role in the share market.

At its core, a share represents a piece of ownership in a corporation. When an individual purchases company shares, they become a shareholder, entitling them to a portion of the company's earnings and assets. A stock certificate, a digital entry, or a simple digital ledger entry symbolize this ownership. Shares enable individuals to become stakeholders in a company, aligning their interests with its success.

1. Equity Shares

Equity shares, often known as ordinary shares, are among the most prevalent categories. These shares represent tangible evidence of an investor's ownership within the company. Notably, equity shareholders shoulder the greatest risk exposure. Possessing these shares grants individuals the authority to participate in company decision-making through voting privileges. It's worth highlighting that equity shares can be traded between investors, and the dividend payout corresponds to a portion of the company's profits.

It's important to underscore that equity shareholders are not entitled to a fixed dividend amount. Remarkably, the financial liability of an equity shareholder is confined to the extent of their initial investment. However, it's essential to acknowledge that these shares do not entail preferential rights regarding ownership hierarchy. That said, there are different types of equity shares (see table).

Authorized Capital - Authorized capital signifies the utmost amount of capital that a company can amass through the issuance of equity shares.

Issued Capital - Issued capital refers to the nominal denomination of shares officially distributed by the company, limited by the upper limit of the company's authorized share capital.

Subscribed Capital - Subscribed share capital, as its name suggests, refers to the portion of the issued capital that investors have committed to. When investors subscribe to the entirety of the company's issued shares, the subscribed and issued capital align perfectly.

Equity Shares Based on Share Capital | mobile_header Equity Shares Based on Definition Equity Shares Based on Returns
Authorized Capital - Authorized capital signifies the utmost amount of capital that a company can amass through the issuance of equity shares.
Bonus Shares - Bonus shares, often scrip dividends or capitalization issues, present a rewarding proposition for existing shareholders. The company bestows these additional shares upon shareholders without necessitating any extra financial outlay.
Dividend Stocks - A dividend is a part of a company's earnings that it chooses to allocate to its shareholders. Dividend-paying stocks consistently and at intervals distribute dividends to shareholders, potentially indicating the company's consistent profitability.
Issued Capital - Issued capital refers to the nominal denomination of shares officially distributed by the company, limited by the upper limit of the company's authorized share capital.
Rights Share - When a company extends the privilege to its current shareholders, enabling them to acquire shares from a fresh offering ahead of the general public, such offerings are recognized as rights shares. These rights issues are tailor-made for existing shareholders, aligning with the principle of proportional allocation based on the number of units they currently possess.
Growth stocks - Growth stocks can undergo substantial price appreciation, leading to amplified returns for shareholders. These stocks could either offer dividends or not and might entail heightened levels of risk. Nevertheless, these stocks appeal to investors keen to invest in substantial capital appreciation.
Subscribed Capital - Subscribed share capital, as its name suggests, refers to the portion of the issued capital that investors have committed to. When investors subscribe to the entirety of the company's issued shares, the subscribed and issued capital align perfectly.
Voting and Non-voting Shares - Shares in a company can be categorized into voting and non-voting shares. Generally, equity shares allow investors to participate in company decisions through voting. Yet, there are instances when companies introduce shares that come with predetermined variations in voting rights or none. In these situations, the company might compensate for the differential voting rights by offering enhanced returns compared to regular equity shares.
Value Stocks - Every individual stock possesses an intrinsic value, which may or may not align with its market price. Value stocks are characterized by a market price beneath their intrinsic value. Investors who acquire these stocks stand to gain when their value equals or surpasses the intrinsic assessment.

2. Preference Shares

Preference shares are financial instruments that signify the shareholder's partial ownership within the company's framework. These shares encompass a fusion of attributes found in both debt securities and equities. Much like debt securities, they typically present predictable yields, often in fixed dividends. Simultaneously, akin to equities, they are actively traded on various stock exchanges.

Dividends are a customary privilege for preference shareholders. Notably, they hold precedence over equity shareholders regarding dividend disbursement and reclaiming investments in scenarios of corporate insolvency.

Types of shares under preference shares include:

  • Cumulative and non-cumulative shares:

For cumulative preference shares, if the company opts not to declare dividends in a given year, the dividends are rolled over and added to the total. These accumulated dividends take precedence when the company generates profits subsequently. On the other hand, non-cumulative preference shares do not amass dividends. This implies that if the company does not register future profits, no dividends will be distributed.

  • Participating and non-participating shares:

Participating and non-participating preference shares offer distinct rights to shareholders. With participating preference shares, shareholders are privileged to partake in surplus profits beyond the distributed dividends to equity shareholders. This means that during prosperous years, these shareholders are eligible for supplementary dividends exceeding the established fixed dividend amount.

On the other hand, non-participating preference shareholders lack the entitlement to engage in profit-sharing once equity shareholders have received their dividends. Consequently, non-participating shareholders will not receive extra dividends if a company generates surplus profits. Their compensation remains confined to the predetermined dividend portion allocated annually.

  • Redeemable and Irredeemable preference shares:

Redeemable preference shares refer to those that the issuing company retains the right to reclaim or repurchase. This action can occur at a predetermined price and a specified time without a set maturity date. As a result, these shares are perpetual, freeing companies from any obligation to make payments after a fixed period.

To Conclude

Shares are the bedrock of investment in publicly traded companies. They empower individuals to become part-owners of businesses, offering a slice of profits and a voice in decision-making. The array of share types provides investors with various options to tailor their investments according to their preferences and objectives.

Whether it's common shares, preferred shares, or any other types, shares remain a vital component of the financial world, offering opportunities for growth and wealth creation.

What is Share FAQs

Share gives you ownership in a company, and broadly, there are two types of shares - equity and preference.

A company divides its capital into shares, each representing a unit of ownership and being offered for sale to raise capital for the company.

Owners of ordinary shares typically receive three characteristic benefits: voting rights, gains, and limited liability.

Did you enjoy this article?

0 people liked this article.

What could we have done to make this article better?

Read Full Article >
Stock NameMarket Price
-
-
-
-
-
-
-
-
-
-
Open Your Demat Account Now!
+91 -

Open Your Demat Account Now!
+91 -