Ordinary Shares

Ordinary shares, also known as common shares, represent a form of equity ownership in a corporation. When an individual holds ordinary shares, they become a partial owner of the company, sharing in both its profits and risks.

Key Features: Ownership and Control Shareholders of ordinary shares have voting rights in company decisions, such as: Electing the board of directors Approving major corporate policies or strategic initiatives The extent of control is proportional to the number of shares held. Profit Participation Ordinary shareholders are entitled to a share of company profits in the form of dividends. Residual Claim In the event of company liquidation, ordinary shareholders have a residual claim on assets after all debts and preferred shareholders are paid. This makes ordinary shares riskier than debt or preferred shares. Capital Appreciation Shareholders may benefit from price appreciation of shares in the stock market. Reflects the company’s growth potential and market confidence. Risk and Reward Returns are variable and depend on the company’s financial performance. Losses or poor performance directly impact the value of shares.

Example: A company issues 1,00,000 ordinary shares. An investor buys 1,000 shares → owns 1% of the company. If the company declares a dividend of ₹10 per share → the investor receives ₹10,000. If the company’s share price rises from ₹100 to ₹150 → the investor gains ₹50,000 in capital appreciation.