Steps to Becoming a Shareholder in a Company

Introduction

An individual who purchases shares in a company is considered a shareholder under Section 2(84) of the Companies Act of 2013, and as a shareholder, they are regarded as an investor with voting rights in the corporation.

How Can Someone Join A Company as a Shareholder?

A corporation issues stock to its shareholders to grant them an ownership stake. This news frequently reveals the daily performance of the stock market as well as its volatility.  

This group of stocks is sorted by industry or size to reflect the performance of the investment market as a whole. Any public corporation that wants to become a shareholder must purchase its stock through a brokerage firm. 

Conversely, contacting a private firm directly and making an investment offer is the process of becoming a shareholder. We will discuss a few key topics that will help us understand “how to become a shareholder of a company” to invest in and own shares in firms. 

Purchasing Stocks Through Brokers

In addition to stocks, brokerage firms often buy and sell other financial assets. Depending on what kind of information and service a person requires from these companies, these corporations offer varying degrees of service.

Complete-Service Brokers

Everything is dependent on the necessity of the needed service. For example, to invest in a company, one must engage the services of a full-service broker who will conduct thorough research of the companies and provide market insights, but no further information. 

However, if the share is being bought for a future date, such as for one’s grandchildren, one can request reduced information from the full-service broker, asking them to supply only the necessary information without going into further detail. 

Stock Types

Not every stock is made equally. An investor needs to be aware of certain stock types. He can invest in the company using the appropriate kind of stocks once he has a thorough understanding of the stock. 

Buying the Thing

One can purchase the stock following a thorough examination. We need a “buy” order for this. Either the broker or the internet brokerage platform is used for this. 

To make sure that the account holder can afford the stock price before making a purchase, new accounts typically have a minimum balance requirement. 

One can purchase the stock after figuring out their budget. Here, the investor must be aware of the stock’s market price as well as its present fluctuating rate.

Who Is Eligible to Purchase Stock?

In India, there are particular guidelines and standards about who is eligible to become a shareholder in a corporation. A few of these are listed below.

Hindu Undivided Family, or HUF

A Hindu Undivided Family, or HUF, is regarded as a person rather than a legal body. A corporation may register its shares under Karta’s name as (A’s HUF). Consequently, a HUF might acquire stock in a business. 

Partnership Companies

It has been stated that a corporation is merely the aggregate name for the individuals who form the partnership, not a distinct individual or legal entity from the other partners. A partnership firm is therefore neither a living being nor a legal entity. 

A company’s partners have the option to become shareholders and have their names added to the shareholder registry. The partnership company may acquire shares in the corporation if it is registered.

Company

As long as it is permitted by its MOA or AOA, or if it purchases shares of another company as part of a compromise or arrangement, a company may affiliate with another company. 

In contrast, a business is unable to purchase its stock. Additionally, there are certain exclusions as well, including buying shares in a corporation that holds stock.

Minors 

A minor’s contract is void and unenforceable since they are not of legal age to enter into one. A minor is not legally capable of entering into a bond or giving authority to another individual. 

In contrast, Hindu law permits the designated guardian to sign a legally enforceable agreement on the child’s behalf. It can be applied to both purchases and sales. Thus, it is lawful for a guardian to enter into a share purchase agreement on behalf of a minor.

Non-resident Indian

Subject to FDI laws and FEMA requirements, foreign firms, foreign nationals, and non-resident Indians are all permitted to acquire stock in Indian businesses. 

Partnership with Limited Liability (LLP)

A Limited Liability Partnership (LLP) is a type of legal entity that can possess real estate and assets. LLP may sign the Memorandum of Association (MOA) or eventually purchase shares to become a shareholder in a company.

Trust

Shares of a trust that is not yet incorporated cannot be registered in its name because it is not a person. However, it could be created under the name of a trustee or trustee. 

Shares may be purchased under the name of a cooperative or registered trust. In this way, a cooperative group or registered trust could become a company shareholder.

The Central or State Government

On behalf of any state government or the federal government, the President of India or a Governor may be shareholders in the company. 

The Act permits the Governor of a State or the President of India to order anyone to attend a meeting of the business. He or she would be regarded as the company’s shareholder.

Conclusion

Directors and shareholders both have a significant influence and play a critical role in carrying out their responsibilities for the efficient operation of the business. 

Any person (who is capable of entering into legal conscience) may purchase shares from a company by applying and owning shares by subscribing through a listed stoke exchange. 

As a shareholder, you have certain rights based on the nature of your share. The Act has granted temporary exemptions for all individuals, including minors, joint holders, and trade unions while maintaining the person’s capacity. 

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