Difference between Share and Stock, Shares vs. Stocks: the Difference

Difference between Share and Stock. 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.

Share Capital: Funds raised by issuing shares in return for cash or other considerations. The amount of share capital a company can change over time because each time a business sells new shares to the public in exchange for cash, the amount of share capital will increase. Share capital can be composed of both common and preferred shares.

The stock of a corporation is all of the shares into which ownership of the corporation is divided. In American English, the shares are commonly known as “stocks”. A single share of the stock represents fractional ownership of the corporation in proportion to the total number of shares. Wikipedia

in other words “a share in the share capital of a company, and includes stock except where a distinction between stock and shares is expressed or implied.”

Difference between Share and Stock

NoShareStock
1Shares in physical form bear distinct numbersStocks are the consolidated value of share capital
2Shares may or may not be fully paidupStock is always fully paid-up
3Shares have a nominal valueStock does not have any nominal value
4All shares are of equal denominationDenomination of stocks varies
5It is not possible to transfer shares into fractionStock is divisible into any amount required. Thus, it is possible to transfer even into fractions
6Shares comes into existence before the stock and it is issued initiallyStock comes into existence after conversion of shares into stock and on conversion of shares into stock, the provisions of the Act governing the shares shall cease to apply to the share capital as it is converted into stock

Nature of a Share

  • (a) A share is a right to a specified amount of the share capital of a company, carrying with it certain rights and liabilities while the company is a going concern and in its winding up. (Halsbury’s Laws of England)
  • (b) A share is the interest of a shareholder in the company measured by a sum of money, for the purposes of liability in the first place, and of interest in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se. [Borland’s Trustee v. Steel Bros., (1901)].
  • (c) A share is a right to participate in the profits made by a company, while it is a going concern and declares a dividend and in the assets of company when it is wound up [Bacha Guzdar v. CIT 57 Bom. L.R. 617 (SC)].
  • (d) A share is not a sum of money but a bundle of rights and liabilities; it is an interest measured by a sum of money. These rights and liabilities are regulated by the articles of a company.
  • (e) Section 44 of the Companies Act provides that a share or other interest of any member in a company is a movable property transferable in the manner provided by the articles of the company.
  • (f) In India, a share is regarded as goods. According to the Sale of Goods Act, 1930, “Goods” means any kind of movable property other than actionable claim and money, and includes stock and shares.
  • (g) According to Section 45 of the Companies Act, 2013 every share in a company having a share capital shall be distinguished by its distinctive number but this provision shall not apply to a share held by a person whose name is entered as holder of beneficial interest in such share in the records of a depository.

Definition of Stock

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:

  • The Articles of Association should specify such conversion.
  • The company should pass an Ordinary Resolution (OR) in the Annual General Meeting (AGM) of the company.
  • The company shall give notice to the ROC (Registrar of Companies) about the conversion of shares into stock within the prescribed time.

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