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STOCKS and SHARES. A " See also:share," in the See also:financial sense, is simply the right to participate in the profits of a particular See also:joint-stock undertaking. In the See also:United See also:Kingdom, in the See also:case of a See also:company constituted under the Companies Acts 1862–1907 as a company limited by shares, the memorandum of association is required to See also:state-among other matters—the amount of See also:capital with which the company proposes to be registered and the amount of the shares into which such capital is divided. Company See also:statistics show a tendency of See also:late years on the See also:part of companies to See also:register with a smaller nominal capital than they did. The tendency too has been to See also:lower the See also:denomination of the shares. £zoo shares, for instance, are now very rare. £1 shares and £5 shares are the most See also:common. They obviously See also:appeal better to the small investor. A typical capital clause runs thus: " The capital of the company shall be £roo,000 divided into 1oo,000 shares of £1 each with such rights as regards dividends and other privileges as are defined by the company's articles of association for the See also:time being," or " The capital of the company is £150,000 divided into 50,000 preference shares of £1 and roo,000 See also:ordinary shares of £1 each. Such preference shares shall confer a right to a fixed cumulative preferential See also:dividend at the See also:rate of 10% per annum." The See also:form of capital clause varies of course, but the more approved practice now is to leave the rights of preferential shareholders to be defined by the articles, and for this See also:reason: that if such rights are fixed by the memorandum of association without qualification they cannot be subsequently varied. Articles, on the contrary, are always alterable, and as the preference shareholder takes his shares subject to this known liability to alteration no wrong is done him. If the See also:powers of alteration were abused so as to amount to a See also:fraud by the ordinary shareholders on the minority of preference shareholders the See also:court would probably interfere by See also:injunction. The preferential or other See also:special privileges of any particular class of shareholders are now further safeguarded by s. 39 of the Companies See also:Act 1907. The right of a preference shareholder is commonly confined to a preferential dividend and this dividend is prima facie cumulative, that is to say if the profits of the particular See also:year are insufficient to pay it the deficiency must be made See also:good out of the profits of subsequent years: but it is very common to give preference shareholders priority also as regards capital in the winding-up. Founders' shares originated with private companies, being a convenient means of securing to the partners in the vendor See also:firm, on See also:conversion, the See also:control of the business as well as the See also:lion's share of the profits. Thence they passed to ordinary trading companies, that is, companies which appeal to the public for their capital. Founders' shares in this connexion commonly entitle the holders to one-See also:half or one-third of the company's profits after See also:payment of a fixed dividend of, say, 7 to 10% to the ordinary shareholders. Founders' shares are mostly subscribed for by the vendors or promoters, though sometimes used by way of See also:bonus to attract subscribers for the ordinary or deferred shares. They are now becoming rare. Share Warrants to See also:Bearer.—The Companies Act (1862) made no See also:provision for the creation of shares to bearer. All shares under the act are registered and the See also:title on the register is evidenced by a share certificate. The act of 1867 introduced shares to bearer under the title of " share warrants to bearer." A share See also:warrant entitles the bearer to the shares or stock specified in it and such shares or stock are transferable by delivery.of the warrant. The warrant is always treated as a negotiable See also:instrument. " Stock " in the case of companies constituted under the Companies Acts 1862–1907 is created by converting paid-up shares into stock. This maybe done under s. 12 of the Companies Act 1862 by See also:resolution. Under the same See also:section a company may increase its capital by the issue of new shares or consolidate it into shares of larger amount; and by s. 21 of the Companies Act 1867 a company may subdivide its shares. The Companies Act 1907 (s. 39) gives a company a further See also:power by special resolution, confirmed by an See also:order of the court, to reorganize its capital, whether by the consolidation of shares of different classes or by the See also:division of its shares into shares of different classes—but no preference or special See also:privilege attached to any class of shares is to be interfered with except by a resolution passed by a See also:majority of shareholders of that class representing three-fourths of the capital of that class. A limited company cannot reduce its capital without the See also:sanction of the court. Public Companies.—The provisions as to shares and stock under the Companies Clauses Acts 1845, 1863, 1869, are, with a few exceptions, analogous to those under the Companies Acts. The 'capital of the company is to be divided into shares of a certain number and amount. A share register is to be kept and certificates are to be issued to shareholders; and power is given to convert paid-up shares into a See also:general capital stock to be divided among the shareholders according to their respective interests therein. Such stock has been called a " set of shares put together in a bundle." Preference shares may be created, but there is this difference between preference shares under the Companies Clauses Act and under the Companies Acts, that under the Companies Clauses Acts preference shares are entitled to dividends only out of the profits of each year; under the Companies Acts the dividends as above stated are prima facie cumulative. Shares and stock may under the Companies Clauses Act be issued at a See also:discount; under the Companies Acts they cannot. Under the Companies Clauses Acts if the old shares of the company are at a See also:premium any new shares are to be offered first to the old shareholders. This is not found in the Companies Acts, but a similar provision is commonly inserted in the articles of companies formed under the acts. (E. Additional information and CommentsThere are no comments yet for this article.
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