KembaraXtra - Legal Terms - Share

A share is a unit of ownership in a company that measures the holder’s financial interest and, in many cases, voting rights. Because a company is a separate legal person from its members, ownership of the company can be divided into transferable units called shares.

In a company limited by shares, shareholders’ liability is generally limited to the amount unpaid on their shares. Once the shares have been fully paid for, shareholders are normally not personally liable for the company’s debts.

Shares are intangible personal property and may be bought and sold independently of the company’s business. While the company continues to operate, shareholders may receive dividends, vote at general meetings, and benefit from any increase in the value of their shares.

If the company is wound up, shareholders are entitled to share in any remaining assets after all creditors have been paid. Where no surplus assets remain, shareholders generally lose only the amount invested in their shares, subject to limited statutory exceptions such as fraudulent trading or wrongful trading.

Preference shares usually entitle their holders to a fixed dividend before ordinary shareholders receive anything. Preference shareholders also have priority in the repayment of capital on winding up and commonly enjoy cumulative dividend rights, although their voting rights are usually restricted to matters affecting their class rights.

Ordinary shares (or equity shares) represent the company’s risk capital. They generally carry full voting rights and unlimited potential to benefit from company profits and increases in share value. Other classes include redeemable shares, which may be bought back by the company under statutory conditions, and golden shares, which give the holder—often the government—special voting powers over specified company decisions.