Abstract
The process of globalisation has indeed brought various benefits to mankind and with the rapid advancements of technology it is possible to track, observe and view almost anything through the internet and various devices, Therefore, it is imperative that company shares which are crucial to the wellbeing of the company be digitalized keeping in tandem with technological advancements. This paper aims to put forward the concept of digitalization of shares by the process of Dematerialization and its effects on the India Securities Market.
Keywords: shares, digitalization, market, technology.
- INTRODUCTION
It is a well-known fact that shares form a significant part of the capital market in any nation but the concept of shares and issuing shares is not new. The concept of issuing shares and trading through stock market began in the 15th Century however [1]the first established stock exchange was formulated by the Dutch East India Company in Amsterdam. Over the Year several stock exchanges were developed all around the world.
If we need to understand the term share in common parlance it literally means a part or portion of something or entity. However, if we look at the definition from a legal point of view then Black’s Law dictionary defines it as a portion of anything including a company’s capital which could either be a trust or a portion of ownership in a particular corporation. In India the term share has not been exclusively defined however according to [2]section 2 (84) it means the share in the share capital of a company which includes joint stock. Before moving on we must note that share capital basically means the amount that has been invested in the company to carry out its operations.
[3]Section 43 of the Companies act mention that when the share capital of the company is limited by shares it can be divided into 2 types namely Equity Share Capital and preference Share capital. Equity shares are mainly known as ordinary shares as they represent the fractional ownership of the company based on the amount of share purchased. In other words Equity share holders can be considered as the owner of the company based on the percentage of share which they hold. It is a common practice in India that while issuing Equity Shares. Preference shares on the other hand means a type of share which yields dividend to the holder before the dividends are yielded to the equity shareholders. Dividends through preference shares always have a set amount. There can be many types of Preference shares which are allotted for example Convertible and Non Convertible Preference Shares, Redeemable and Non Redeemable shares etc.
[1] Dutch East India Company by Britannica Encyclopaedia, Visited on 27th October (21:30 P.M) available at https://www.britannica.com/topic/Dutch-East-India-Company
[2] Companies Act, 2013, § 2(84), No. 18, Acts of Parliament, 2013 (India)
[3] Section 43 of the Companies Act, 2013 – The share capital of a company limited by shares shall be of two kinds, namely:— (a) equity share capital— (i) with voting rights; or (ii) with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed; and (b) preference share capital: Provided that nothing contained in this Act shall affect the rights of the preference shareholders who are entitled to participate in the proceeds of winding up before the commencement of this Act.