As per Section 61, Companies Act, 2013, the company can convert its shares which are fully paid up, into stock. A ‘Share‘ is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company. A ‘Stock‘ on the other hand is a collection of shares of a member that are fully paid up. When shares are transformed into stock, the shareholder becomes a stockholder, who possess same right with respect to the dividend, as a shareholder possess.
All the shares are of equal denomination, whereas the denomination of stock differs. When one wants to invest in shares, he/she must be aware of the difference between shares and stock, along with the conditions, when shares are converted into stock. Take a read of the article, in which we have discussed, the entire concept of these two.
| Basis for Comparison | Share | Stock |
|---|---|---|
| Meaning | The capital of a company, is divided into small units, which are commonly known as shares. | The conversion of the fully paid up shares of a member into a single fund is known as stock. |
| Is it possible for a company to make original issue? | Yes | No |
| Paid up value | Shares can be partly or fully paid up. | Stock can only be fully paid up. |
| Definite number | A share have a definite number known as distinctive number. | A stock does not have such number. |
| Fractional transfer | Not possible. | Possible |
| Nominal value | Yes | No |
| Denomination | Equal amounts | Unequal amounts |
A share is defined as the smallest division of the share capital of the company which represents the proportion of ownership of the shareholders in the company. The shares are the bridge between the shareholders and the company. The shares are offered in the stock market or markets for sale, to raise capital for the company. The shares are movable property which can be transferred in a manner specified in the Articles of Association of the company.
The shares are mainly divided into two categories: Equity shares and Preference shares.
Equity shares are the common shares of the company which carries voting rights while Preference shares are the shares which carry preferential rights for the payment of dividend and also for the repayment of capital in the event of winding up of the company.
The shares of a company can be issued in three ways:
The stock is a mere collection of the shares of a member of a company in a lump sum. When the shares of a member are converted into one fund is known as stock. A public company limited by shares can convert its fully paid-up shares into stock. However, the original issue of stock is not possible. For the conversion of the shares into stock the following conditions are to be fulfilled in this regard:
After the conversion of shares into the stock, Register of members of the company will show the stock held by each member, in place of shares held by them. Although, there should not be any change in the voting rights of the members. In addition to this, there is no effect on the transferability of shares. Instead, they can now be transferred in the fraction. They are of two types: Common Stock and Preferred Stock.
The principal points of difference between share and stock are as follows:
There is always a buzz between share and stock. In this article, a detailed description is provided which gives emphasis on the difference between them. In short, it can be said that the tiny part of the company’s capital is share while the collection of shares held by a member is stock. The Indian Companies Act, 2013 authorized a limited company to convert shares into stock and vice versa. There are certain legal formalities which are to be met for such conversion.
