{"id":4216,"date":"2025-03-28T17:14:48","date_gmt":"2025-03-28T11:44:48","guid":{"rendered":"https:\/\/www.torusdigital.com\/toruscope\/?p=4216"},"modified":"2025-08-22T18:59:25","modified_gmt":"2025-08-22T13:29:25","slug":"what-are-ordinary-shares","status":"publish","type":"post","link":"https:\/\/www.torusdigital.com\/toruscope\/stocks\/what-are-ordinary-shares\/","title":{"rendered":"Understanding Ordinary Shares: A Comprehensive Guide"},"content":{"rendered":"

[vc_section el_id=”blog-inner-layout”][vc_row overlay_dotted=””][vc_column el_class=”blog_primary”][vc_row_inner][vc_column_inner][vc_column_text css=””]According to the Companies Act 2013, a share represents the extent of a shareholder’s interest in a company’s assets. In simpler terms, shares signify a shareholder’s ownership stake in the company.<\/span><\/p>\n

Ordinary shares<\/b> or common shares refer to company stock that grants shareholders voting rights at company meetings and entitles them to a portion of the company\u2019s profits through dividends. In this blog, you will understand <\/span>what are ordinary shares<\/b>, how they are different from preference shares, their key features and how you can buy ordinary shares of a company.<\/span><\/p>\n

<\/span>What are Ordinary Shares?<\/b><\/span><\/h2>\n

Ordinary shares definition <\/b>is simple, as these are equity or common shares, which are a type of stock a company issues under the Companies Act, 2013. These shares indicate your ownership in the company and grant some specific rights, such as the right to vote on corporate matters during general meetings.<\/span><\/p>\n

It helps to understand that each share represents a fraction of ownership in the company. The more shares you hold, the larger your ownership and influence over the company’s decisions. For instance, if ABC Limited issues 300,000 <\/span>ordinary shares<\/b> and you acquire 210,000 of them, you will own 70% of the company, giving you substantial control over its operations.<\/span><\/p>\n

<\/span>What is the Difference Between Ordinary Shares and Preference Shares?<\/b><\/span><\/h2>\n

Follow this table to know the difference between ordinary and preference shares:<\/span><\/p>\n\n\n\n\n\n\n\n\n\n
Aspect<\/b><\/td>\nPreference Shares<\/b><\/td>\nOrdinary Shares<\/b><\/td>\n<\/tr>\n
Dividends<\/span><\/td>\nThe dividend rate is predetermined and fixed.<\/span><\/td>\nDividends do not have a fixed rate and may vary.<\/span><\/td>\n<\/tr>\n
Eligibility for Bonus Shares<\/span><\/td>\nNot eligible to receive bonus shares.<\/span><\/td>\nEligible to receive bonus shares.<\/span><\/td>\n<\/tr>\n
Claim on Dividends Arrears<\/span><\/td>\nPreference shareholders have the right to claim unpaid dividends from previous years.<\/span><\/td>\nOrdinary shareholders do not have the right to claim unpaid dividends.<\/span><\/td>\n<\/tr>\n
Role in Management<\/span><\/td>\nThey do not participate in the company’s management decisions.<\/span><\/td>\nOrdinary shareholders have a say in the management and decision-making process.<\/span><\/td>\n<\/tr>\n
Voting Rights<\/span><\/td>\nPreference shareholders do not possess voting rights in company decisions.<\/span><\/td>\nOrdinary shareholders can vote on key company matters.<\/span><\/td>\n<\/tr>\n
Fundraising Purpose<\/span><\/td>\nUsed by companies to raise capital, typically with guaranteed dividends.<\/span><\/td>\nUsed by companies to raise capital, with shareholders having a stake in decision-making.<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

<\/span>What are the Main Characteristics of Ordinary Shares?<\/b><\/span><\/h2>\n

Ordinary shares<\/b> have several features that differentiate them from other types of shares such as:<\/span><\/p>\n