Who is a Shareholder?
A shareholder also knows as a stockholder is a company or an individual that owns at least one share of an organisation’s capital stock. Shareholders are mostly the owner of the company and generally acquire the company’s accomplishment in the form of increased stock valuation. However, if the company stock price drops, the shareholder may have to bear the losses too.
Ways to Become a Shareholder
An individual or company can become a shareholder in any company in the following ways:
Investing in Private companies:
- To become a shareholder in a company, one needs to have the consent of the Board of Directors, and a resolution has been passed.
- The stocks in a private company are recorded in a ledger under the supervision of the corporate secretary.
- Once all the price negotiation per number of shares are discussed, dispatch the amount to the company.
- Then the notes are made on the ledger for its ownership. The owner and secretary sign share paper and issued as a proof of ownership
Also Read: What are the different types of Stockholder?
Making the Purchase:
- The purchase of stock need ‘buy’ order. This purchase is made through the broker or online brokerage platform.
- A new account needs a minimum budget to make the advance payment before you purchase.
- Decide your expense, and verify the budget per share of the stock.
For example, to purchase 100 stock of ABC company priced at ₹25 per stock with a commission of 1 per cent, you require ₹2,500 for the stock and ₹25 for the commission – a total of ₹2,525 for the deal.
- Brokerage Firms sell and buy stocks with other financial institutions.
- Online Brokerage firm gives an individual an opportunity to buy and sell the stock at a fixed price, but charge commission per transaction.
- The advantage of a brokerage firm is that they do the market analysis and gives information to the client.
For example- a ₹10,000 deal might pay a ₹500 brokerage charge, though the average fee for a broker is 1 to 2 percentage.
The above mentioned is the concept, that is elucidated in detail about ‘How to Become a Shareholder?’ for the Commerce students. To know more, stay tuned to BYJU’S.