Transferability of Shares

Shares-A share is the interest of shareholder in terms of money in the business represented as a liability on the company. In the words of Justice Farewell, “The interest of a shareholder in the company measured, by a sum of money for the purpose of liability in the first place, and the interest (dividend) the second, but also consisting of various covenants entered into by the shareholder inter se.” It defines the relation between the company and shareholder. Shareholders are the real owners of the company, but they do not own the company’s assets as they belong only to the company because company is a separate legal entity. Therefore, the shareholders ownership is represented by the shares in the company.
Characteristics of Shares:-
1. The property or the assets of the company does not belong to the shareholders.
2. Shares are transferable. Shareholder can transfer its shares to any person of their like, for cash or kind.
3. Shares are goods.
Types of Shares:- Mainly there are two types of Shares:-
1. Equity Shares: - (a) With Voting Rights
(b) With differential rights as to dividend, voting or otherwise.
2. Preference Shares:- (a) Cumulative and Non-Cumulative Preference Shares
(b) Participating and Non-Participating Preference Shares
(c) Redeemable and Irredeemable Preference Shares
(d) Convertible and Non-Convertible Preference Shares
1. Equity Shares: - Equity Shares are also termed as ordinary shares. Shareholders holding equity shares have the residual right of the company. They may get higher dividends than the preference shareholders or may get nothing depending on the profit remained after paying all the expenses and dividend to shareholders. The share holders holding equity shares are also termed as residual claimants. It is the risk bearing capital of the company.
2. Preference Shares: - Preference Shares are those shares which satisfies the following two conditions:-
(a) the preference shareholders have the preferential rights with