What is a Share?
Suppose you have a pizza, and you decide that all of you will share it. There are four of you. You decide that each friend owns one fourth of the pizza. But Ramesh thinks you will cheat. To pacify him, you make 4 chits and write on each chit "The holder of this chit owns one fourth of the pizza." You take your own chits and go home happily.
You have just created share certificates for the pizza!
A share is nothing but a share of ownership of a company. A share certificate is proof of that ownership.
Shareholding and Shareholders
Suppose now, that you create a small library.
You need 2000 rs to start the library. Aman gives 200 rs, Babita brings 500, Charu has 400, Danish has 100, and Easwar has the remaining 800. You decide that everyone must own the business in the same ratio as the money they bring in. So, Aman owns 10% (200/2000 *100) , Babita owns 25%, Charu owns 20%, Danish owns 5%, and Easwar owns 40%.
You need 2000 rs to start the library. Aman gives 200 rs, Babita brings 500, Charu has 400, Danish has 100, and Easwar has the remaining 800. You decide that everyone must own the business in the same ratio as the money they bring in. So, Aman owns 10% (200/2000 *100) , Babita owns 25%, Charu owns 20%, Danish owns 5%, and Easwar owns 40%.
You are all shareholders of the company now. Shares are also called stock.
Private Limited and Public company
You folks decide that you will not let anyone else come into the business. Only you and your friends. This is a private limited company.
But after a few months, a lot of the colony children say they love the library business idea and want to share in it. They all want to buy ownership of the library company.
Then, you give in and tell them, Ok, they can buy and sell their ownership freely. Anyone, whether they are from your gang or not, can buy and sell ownership of the library. Whoever brings you the chit of ownership will get a share of the profits of that month.
Your company has now become a public limited company.
The shares of a private company are not openly traded in the Stock Exchanges. Because of this, private companies need to share very little information compared to public limited companies.
The shares of a private company are not openly traded in the Stock Exchanges. Because of this, private companies need to share very little information compared to public limited companies.
The stock exchange
Where do you go to buy vegetables? Why, the market, of course! And where do you go to buy clothes? The clothes market. Like that, there is a special market where people buy and sell stocks. That market is called the Stock Exchange - a place where stock in companies is exchanged.
Holding Company
Did you know that one company can own another company? Yes! The company that holds all or most (more than 50%) shares of another company is called the holding or parent company.
NCLT and NCLAT
Companies Act is the law that governs all the companies in India. What if we think someone has done something that is against the Company law? We can file a case in the National Company Law Tribunal (NCLT).
Now, suppose we take a case there and we are not happy with the decision. Then?
No problem! We can file an appear in the National Company Law Appellate Tribunal (NCLAT)
And then? Well, after these two, it is the Supreme Court.
Board of Directors
In your library business, you ask some parents to guide you. These parents meet all of you every Sunday and ask how you're doing, how many new members you made, how many books were taken, how much money you made, and how many new books you want to buy, etc. They are your Board of Directors.
The Board of Directors of a company are the highest level of control and governance of a company. The Board is expected to ensure that the company is run well and acts in the interests of the shareholders.
Board of Directors
In your library business, you ask some parents to guide you. These parents meet all of you every Sunday and ask how you're doing, how many new members you made, how many books were taken, how much money you made, and how many new books you want to buy, etc. They are your Board of Directors.
The Board of Directors of a company are the highest level of control and governance of a company. The Board is expected to ensure that the company is run well and acts in the interests of the shareholders.
Read today's paper to find out why this is important! :)
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