A share/stock refers to a unit of ownership in a Company with a share capital. While a shareholder is the entity or person in who’s name the shares are registered under.
In this article, we look at the various ways in which changes in a Company’s shareholding occurs. A change in a Company’s shareholding occurs in various ways, either through allotment, forfeiture, transfer, transmission, split or consolidation of shares.
An allotment of shares refers to the issuance of the previously unissued shares of a Company. A company may increase its share capital therefore creating new shares to be allotted to the members.
Forfeiture of shares refers to the cancellation of shares held by a shareholder and reversion of the said shares to the Company. This may be as a result of a shareholder failing to pay up for shares upon a call up by the Company
Transfer of shares refers to the handing over any rights and privilege enjoyed by virtue of owning a share., whereas a transmission of shares refers to the transfer of shares to a beneficiary following the demise of the shareholder. Transmission of shares refers to a share split or share consolidation put in simple terms refers to a reorganization of the share structure of the Company without altering its share capital. A share split constitutes increasing the number of shares by a predetermined margin whilst reducing the value of the said shares by a similar margin whereas a share consolidation constitutes reducing the number of shares by a predetermined margin whilst increasing the value of the said shares by a similar margin. Companies usually undergo a share split or consolidation in order to correct an overvaluation or undervaluation of shares in the market. It is key to note that the share capital of the Company is not altered but rather the number and the value of shares.