Can I convert my shares into stock?

Can I convert my shares into stock?

March 26, 2019

What is the difference between a share and a stock?

A Share is the smallest unit into which the company’s capital is divided, representing the ownership of the shareholders in the company. A Stock on the other hand is a collection of shares of a member that are fully paid up. When shares are transformed into stock, the shareholder becomes a stockholder, who possess same right with respect to the dividend, as a shareholder possess.

According to the Companies and Allied Matters Act, the following are necessary to convert shares into stock;

  • The conversion of any paid‐up shares into stock and the re‐conversion of any stock into paid‐up shares shall be by ordinary resolution of the company at a general meeting.

 

  • The holders of stock may transfer the same, or any part of it, in the same manner and subject to the same conditions, as and subject to which the shares from which the stock arose might, previous to the conversion, have been transferred, or as near to it as circumstances admit; and the directors may, from time to time, fix the minimum amount of stock transferable, so however that such minimum shall not exceed the nominal amount of the shares from which the stock arose.

 

The effects of converting shares into stock are;

 

  • The holders of stock shall, according to the amount of stock held by them, have the same rights, privileges and advantages as regards dividends, voting at meetings of the company and other matters as if they held the shares from which the stock arose, but no such privilege or advantage (except participation in the dividends and profit of the company and in the assets on winding up) shall be conferred by an amount of stock which would not, if existing in shares, have conferred that privilege or advantage.

Provisions of the articles of the company as are applicable to paid‐up shares shall apply to stock, and the words “shares” and “shareholder” in those articles shall include “stock” and “stockholder’’

Reference-S 150 CAMA

Team 618 Bees

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