What Are Shares: Meaning, Types, Pros and Cons

Posted by Infiny Solution on October 24th, 2021

The capital of the company is divided into units and each unit is known as shares. It is the percentage of the ownership of the owner in a company. The person who invests or holds a share is known as a shareholder.

Equity shares are the most common term used in the stock market. They are commonly known as ordinary shares.

Equity Shares
A person becomes a fractional owner when one invests in the equity shares of the company. They have the right to vote in the annual general meetings too. A fractional owner has a say in the working of the company. An equity shareholder is entitled to receive dividends from the company too.

Note: The rate of the dividend is not fixed. The payout also depends on the discretion of the firm.

Features:
- Equity shares are permanent in nature.
- They are transferable and dividend payout.
- They have potentially high returns.
- Equity shares provide creditworthiness and act as collateral.
- High liquidity
- You have a say in the working of the company when you hold an equity share.

Preference shares
This type of share gives preferential rights to the owner as compared to the other types of shares. The benefit of preference share is that the share of the profit is earned by the company. These hares have the first right in terms of getting repaid when the company winds up.

Subcategories of preference shares are as follows:
- Cumulative preference shares: The shareholders of cumulative preference shares have full rights to receive arrears on the dividend. They receive the arrears before the dividend is paid to equity shareholders.

- Non- cumulative preference shares: They cannot claim any outstanding dividend. The shareholders earn a dividend only when the company earns a profit.

-Convertible preference shares: These shares are convertible into preference shares at a particular period of time. But the conversion of shares must be authorized by the AOA ( Articles of Association) of the company.

When it comes to the recovery of shares from IEPF, an individual must put all the details on the IEPF recovery form. Wrong or outdated details may result in the delay of recovery of unclaimed shares and dividends.

DVR Shares
DVR shares are the differential voting rights shares. The shareholders of DVR have fewer voting rights to dilute the voting privilege. A company provides extra dividends to DVR shareholders. DVR shares have fewer voting rights and their prices are also low as compared to equity shares. There is around a 30% to 40% price gap between DVR shares and equity shares.

Pros and Cons of buying shares

- When you invest wisely, you gain capital and vice versa. This is the reason why people considered the stock market as the fastest way to build wealth.
- Dividends are rolling stones. Today if you have the dividend, tomorrow you may or may not have it.
- It is a game of choice and luck. If you\'re lucky, you can win an ample amount. It is not that your luck will always favor you. The choices you make decide the future of the game.
- We have seen people earning crores of money and losing everything in the stock market. Obviously, it is your fate which decides whether you will be the loser or gainer. It is a matter of fate and quick decisions that are made in the stock market.



Summing up

The IEPF recovery form is easily available on the official website. All you need to do is to download and fill-up the form.
Make sure you fill the form without any wrong or outdated information. It is very important to fill it properly in order to get your shares recovered soon. Any wrong information may lead to delay in the process of recovery.

Buying or investing in shares is a good way to make more money. In case you have unclaimed shares and dividends, you must always be ready for the recovery of shares from IEPF.