General, Tips



By Isochukwu Michael Nwosu.
A shareholder is one who holds shares in a company . By owning shares, the shareholder becomes a member of the company and certain rights are conferred therewith
Shares are derived from the share capital which is divided into units of shares for subscription. A Share is therefore the interest in a company’s capital or income. Generally speaking;

  1. A share is a unit of investment in a company.
  2. A share is not a sum of money.
  3. But it is an interest measured by a sum of money.
  4. It is measured by a sum of money for the purpose of liability.
  5. It is also measured by a sum of money for the purpose of interest.
  6. It confers rights of membership under the articles of association.
  7. It confers right of return of capital of a more or less amount.
    The companies are empowered to create classes of shares with different rights attaching to each class provided that at least one shareholder of every company must be an ordinary shareholder. The most common Classes of Shares are:
  • Ordinary/equity Shares: Is the primordial class of company’s shares. They carry the residual rights in the company. In the sense that their holders would be entitled to the residue/surplus of the dividend (and or repayments as the case may be) after the preference shareholders have been paid/settled. The elders who take the last drop.
  • Preference Shares: confers a preference on their holders. Their holders are entitled to dividend and return of capital before same is paid to the ordinary shareholders. The nature of preference shares and the rights attached to them is a question of construction of the memorandum and articles of terms of issue..
  • Deferred/Founders Shares: usually rank next in priority to ordinary shares. Entitle the holder to profits after the ordinary and preference shareholders have been paid dividend.
    One may become a member through the following:
  • By subscribing to the memorandum of association when the company is being incorporated.
  • By purchasing shares in a company.
  • By agreeing to take shares in the Company in return for some other consideration.
  • By taking a transfer of shares or by inheriting shares of a deceased shareholder.
    An infant can become a member of a company where there is another adult in the shareholding structure. A company can also become a member of another company. In such a case it shall be represented at meetings.
    A Shareholder of a company may (subject to legal restrictions) sell or transfer his shares in a company. The person who buys or receives his share is called the “allotee”. The allottee becomes a member of the company after he has paid for the shares and had his name entered in the register of shareholders. A Share Certificate shall then be issued to the shareholder for the shares allotted to the allottee.
    The laws requires that a Register of Members be kept in the company’s registered office or other office where the work of making it up is done. This register can be inspected by members and non-members
    Pre-Emption Clauses: confers a right to acquire shares of a company before others can. E.g. “if you want to sell your shares, tell A. If A does not want to buy, then you can sell to another person. Sha ask A first”. The shareholders or directors may be given pre-emption rights to take up shares and if they don’t want, the shares can be issued to others. The courts have held that the acceptance must be unconditional. Noting that the person with pre-emption rights must take up all or none of the shares offered-Philips V Manufacturers’ Securities Ltd ([1917] 116 LT 290, 297). In Ocean Coal Co V Powell Duffryn Coal Co [[1875] L. R. 10 C. P. 562], the offer of 135,000 shares was countered with an offer to take only 5,000 of the shares. This was rejected by the Court.


Utannah Dania in General
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