Accounting

What Is A Share – Characteristics | Types | Benefits | Risks

What is a Share?

What is a Share?

The capital of an enterprise is divided into several portions called shares. A share therefore corresponds to a part of the capital of an enterprise. The holder of shares of a company is called a shareholder, it can receive dividends, and has rights of intervention on the management of the company. A share is a title of ownership that corresponds to shares of capital of an enterprise. For example, a company may have shares of its capital in the form of shares in the stock market.

Characteristics of a Share

The share represents the rights of each partner in the company. The value of the share on the stock market can increase or decrease, we speak then the share price.

The holder of a share is called a shareholder. Holding a share also means having the right to intervene in the management of the business, and to receive dividends. Public limited companies, companies with simplified shares have capital, and therefore shares.

Forms or Types of Shares

There are two main types of shares: registered shares and bearer shares.

Registered shares: Registered shares are shares that are recorded in the company’s accounts. They bear the name of the holder. The company therefore has direct links with the shareholders and knows their identities.

Bearer shares: Bearer shares are recorded in the accounts of a financial intermediary, such as a bank. A company that has bearer shares has no direct link with its shareholders, and does not know their identities.

The Benefits of a share

Holding a share opens certain rights:

Right to remuneration: you can receive remuneration from the company, in the form of dividends.

Right to information: Companies are obliged to transmit the essential information of the company’s accounts to their shareholders, for example with the annual report. The company must be transparent to its shareholders.

Voting rights: Shareholders receive a notice of meeting for each general meeting of the company. The shareholder then has the right to vote and to express an opinion on the management of the company, for example at the time of closing the accounts. This allows shareholders to participate in the decision-making of the company.

The Risks of a share

Being a shareholder also entails potential risks. For example, if the company goes bankrupt, the shareholder loses the value of his investment. Between the purchase of the share and its resale, it may lose its value. Indeed, the share price can vary, and it is impossible to predict its evolution in a safe way.

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