The description of stock and shares is as follows:
The total capital of the company is divided into units of small denominations. Each such unit is called ‘share.’ Shares are numbered so that they can be identified.
If the total capital of the company is ₹10,00,000 divided into 1,00,000 units of ₹10 each, each unit of ₹10 will be called as share.
NATURE OF SHARES
The shares of the company are movable property, transferable in the manner provided by the Articles of Association of the company. Shares of a company are treated as goods under the Sale of Goods Act, 1930. These can be bought, sold and hypothecated.
Stock is the aggregate of fully paid up shares, consolidated and divided, for the purpose of convenient holding into different parts. It is a mere collection of the shares of a member of company in a lump sum. When the shares of member are converted into one fund, it 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:
- The Articles of Association should specify such conversion.
- The company should pass an Ordinary Resolution in the Annual General Meeting of the company.
- The company shall give notice to the Registrar of companies about the conversion of shares into stock within the prescribed time.
DIFFERENCE BETWEEN STOCK AND SHARES
|BASIS OF DIFFERENCE||SHARES||STOCK|
|MEANING||The capital of company is divided into small units, which are commonly known as shares.||The conversion of the fully paid up shares of member into a single fund is known as stock.|
|ORIGINAL ISSUE||It is possible for the company to make an original issue of the shares.||It is not possible for the company to make an original issue of stock.|
|PAID UP VALUE||The shares can be partly or fully paid up.||The stock can be fully paid up only.|
|DEFINITE NUMBER||A share has a definite number known as distinctive number.||A stock does not have any distinctive number.|
|FRACTIONAL TRANSFER||The shares cannot be transferred in fractions.||The stock can be transferred in fractions.|
|NOMINAL VALUE||The shares have fixed nominal value.||The stock does not have any fixed nominal value.|
|DENOMINATION||The shares of particular class have equal denominations.||The stock may be of unequal amount.|
|REGISTRATION||The shares are always registered and are not transferable by mere delivery.||The stocks may be registered or unregistered and unregistered stock can be transferred by mere delivery.|
|TYPES||The shares are basically of two types: Equity shares and preference shares.||The stock has no types.|