How to Become a Shareholder
Read everything you need to know about shares, and stocks and learn how to become a shareholder of a company.
Izhar Ahmad19 Dec, 2023
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How to Become a Shareholder: To become a shareholder in a company, people, companies, or groups must hold at least one share of the company's stock, which is referred to as equity. Shareholders serve as the company's proprietors, sharing the benefits of its success.
Becoming a shareholder is a major step in investment and finance, indicating ownership in a business and opening various financial possibilities and responsibilities. Shareholders are highly involved in the company's success, as they stand to gain from its growth and revenue.Also Read- Difference Between E-Commerce and E-Business
Shareholder Meaning
A shareholder, also referred to as a stockholder, is an entity or an individual holding a minimum of one share in a company's capital stock. Shareholders typically represent ownership in the company and typically witness the company's success through augmented stock values. Conversely, should the company's stock price decline, the shareholder may also incur losses.How to Become a Shareholder of a Company
To become a shareholder in a company, it is possible through different ways, as described below:Investing in Private Companies:
To become a shareholder in a company, a person or organization must receive approval from the Board of Directors, followed by a passed motion. In the case of private companies, stock transactions are carefully recorded in a book watched by the company secretary. After discussing share prices, the agreed-upon amount is transferred to the company. Subsequently, ownership details are entered in the notebook, and shared papers, signed by both the owner and secretary, serve as proof of ownership.Executing a Purchase:
Initiating a stock purchase involves placing a 'buy' order, a process usually handled through a broker or an online trading site. Opening a new account requires an initial budget, which is paid before making any purchases. Determining the total cost includes confirming the budget per share of the desired stock.Brokerage Firm:
Brokerage companies work as middlemen in stock deals, enabling buying and selling activities with other financial institutions. Online trading companies offer people the chance to trade stocks at a set price, albeit with a fee per transaction. The benefit of hiring a trading company lies in its ability to conduct market research and provide information to clients.Who Can Become a Shareholder
There are specific rules and norms in India on who can become a shareholder of a company, some of them are mentioned below:HUF (Hindu Undivided Family):
A HUF (Hindu Undivided Family) is considered a person rather than a legal entity for all intents and purposes. The shares of a corporation may be registered in Karta's name as (A's HUF). As a consequence, a HUF may become a shareholder in a company.Partnership Firms:
It has been said that a company is not a different person or legal entity from the partners who comprise the partnership, but rather a collective title for the persons who make the partnership. As a consequence, a partnership company is neither a legal entity nor a living person. The partners of a partnership firm may become a shareholder of a company, and their names can be entered on the shareholder registry. If the partnership firm is registered, it may become a shareholder in the corporation.Looking for the Best Commerce Coaching?
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Company:
A company can attach itself to another company as long as its MOA or AOA permits it, or if it acquires another firm's shares as a Compromise or Arrangement. By contrast, a company cannot buy its own shares. Besides, there are also particular exclusions, such as the purchase of a company's holding company shares.Minors:
Because a minor lacks the legal competence to engage in a contract, his or her contract is null and invalid. A minor lacks the legal competence to engage in a bond or delegate authority to another person. The approved guardian, on the other hand, is authorized under Hindu Law to enter into a binding contract on behalf of the child. It may be used for both selling and buying. As a consequence, a guardian may legally engage into a share purchase arrangement on behalf of a child.Indian Non-Resident:
Foreign corporations, foreign nationals, and non-resident Indians are all allowed to become a shareholder in Indian enterprises, subject to FDI regulations and FEMA criteria.Limited Liability Partnership (LLP):
A Limited Liability Partnership (LLP) is a legal entity with the power to own assets and properties. LLP may become a shareholder in a company by signing the Memorandum of Association (MOA) or in due course buying shares.Trust:
Because a trust that has not been incorporated is not a person, its shares cannot be registered in its name. But it may be established in the names of one or more trustees. Shares may be taken in the name of a registered trust or co-operative organization. With this, a registered trust or cooperative organization may become a shareholder in a corporation.Government (Either Central or State):
The President of India or a Governor may be shareholders on the behalf of any of the state governments or the central government in the Company. As per the Act, the President of India or a Governor of a state may direct anyone to attend any meeting in the business. He or she would be considered a shareholder in the firm.Also Read- What Is Consumer Awareness? Consumer Rights & Responsibilities
Rights of Shareholders
Shareholders traditionally possess the following rights:- The privilege to examine the company's books and records.
- The authority to initiate legal proceedings against the corporation for the actions of its directors and/or officers.
- The capacity to participate in voting on significant corporate affairs, such as the election of board directors and the determination of whether to approve potential mergers.
- The right to receive dividends.
- The entitlement to attend annual meetings, either in person or through conference calls.
- The ability to cast votes on crucial matters via proxy, utilizing methods like mail-in ballots or online voting platforms in the event of inability to attend voting meetings in person.
- The right to assert a proportionate share of proceeds in the event of a company liquidating its assets.
How to Become a Shareholder FAQs
Who are the shareholders?
A stockholder (a shareholder) is a corporation or a person having at least one share of the capital stock of a corporation.
What advantages does being a shareholder provide?
An appreciation of a company's capital, which means an increase in stock value, as well as dividends, can accrue to shareholders as long as the company pays them dividends.
Can I be a shareholder in any company?
All the organizations listed on stock exchanges are open to the purchase of shares.
How can a private company issue stock?
Private companies have shareholders and issue stock, but their shares are not traded on public markets and are not issued via an IPO (Initial Public Offering).
What exactly is a brokerage firm?
A brokerage business acts as a middleman in a variety of situations, such as investing, receiving a loan, or acquiring real estate.
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