Types of Shares that can be Recovered

Minakshi Bindhani

14 Apr, 2023

Recovery of shares in a company that entitles shareholders to certain rights, such as voting, receiving dividends, and participating in decision-making processes. However, there may be instances where shares are lost or stolen, or their ownership is disputed, leading shareholders to seek their recovery. The process of recovering shares can be challenging and may depend on the type of shares involved. This blog provides a detailed analysis of the types of shares that can be recovered and the procedures involved. The types of shares covered include registered shares, bearer shares, redeemable shares, preference shares, cumulative preference shares, and convertible shares. Understanding the types of shares and the processes involved in their recovery can help shareholders protect their interests and investment in the company.

Purpose of Recovery of Shares

Shares can be recovered to provide shareholders with a clear understanding of the types of shares and the procedures involved in their recovery. This understanding can help shareholders protect their investments and interests in the company, maintain ownership structure stability, and promote investor confidence.

The recovery of shares is vital because they represent ownership in the company. The loss or theft of shares can result in financial losses and a loss of control over the company. By understanding the different types of shares and their recovery procedures, shareholders can take the necessary measures to safeguard their investments and recover any lost or stolen shares promptly.

For example, knowing the evidence required for recovering registered shares can help shareholders prepare the necessary documentation in advance and prevent any delays in the recovery process. Similarly, understanding the procedures involved in recovering bearer shares can help shareholders navigate the process smoothly and ensure they comply with legal requirements.

Overall, the object of the types of shares that can be recovered is to empower shareholders with the knowledge and tools needed to protect their investments and maintain control over their ownership in the company. By promoting investor confidence and stability in the company’s ownership structure, the recovery of shares can benefit both shareholders and the company.

Types of Shares that can be Recovered

There are different scenarios where shares can be recovered in corporate finance, and the types of shares that can be recovered depend on the recovery circumstances.

Here are some examples:

• Registered Shares:
  Registered shares are issued in the name of a specific shareholder^[1] and registered with the company. The company’s share register records the shareholder’s name and address. These shares are transferable but must be recorded in the share register. In case of loss or theft of registered shares, the shareholder can recover them by requesting the company cancel the lost or stolen shares and issue new ones. The shareholder may also have to provide evidence of ownership, such as the share certificate or other documents.
• Bearer Shares:
  Bearer shares are not registered in the name of a specific shareholder but are owned by whoever holds them. The ownership of bearer shares is transferred by physically delivering the share certificate. Because bearer shares are not registered, they can be easily lost or stolen. In case of loss or theft, the shareholder can recover the shares by requesting the company cancel the lost or stolen shares and issue new ones. However, recovering bearer shares can be challenging because there is no record of ownership and the person who holds the share certificate is presumed to be the owner.
• Redeemable Shares:
  Redeemable shares can be redeemed at a fixed price or on a specified date. These shares are often used to raise capital for the company. In case of loss or theft of redeemable shares, the shareholder can recover them by requesting the company cancel the lost or stolen shares and issue new ones. However, the shareholder may lose the right to receive the redemption price or participate in the company’s decision-making process if the shares are redeemed before they are recovered.
• Preference Shares:
  Preference shares give the shareholder specific preferences over other shareholders, such as the right to receive a fixed dividend before any other dividends are paid. In case of loss or theft of preference shares, the shareholder can recover them by requesting the company to cancel the lost or stolen shares and issue new ones. However, the shareholder may lose the right to receive the preferred dividend if the dividend has already been paid to the person who holds the lost or stolen shares.
• Cumulative Preference Shares:
  Cumulative preference shares give the shareholder the right to receive a fixed dividend, which accumulates if not paid in a particular year. In case of loss or theft of cumulative preference shares, the shareholder can recover them by requesting the company to cancel the lost or stolen shares and issue new ones. However, the shareholder may lose the right to receive the accumulated dividends if they have already been paid to the person who holds the lost or stolen shares.
• Convertible Shares:
  Convertible shares can be converted into another type of security, such as common shares or bonds, at a predetermined price or on a specified date. In case of loss or theft of convertible shares, the shareholder can recover them by requesting the company to cancel the lost or stolen shares and issue new ones. However, the shareholder may lose the right to convert the shares if the conversion date has already passed or if the company has already issued the maximum number of shares that can be converted.

Conclusion

In conclusion, the recovery of shares provides shareholders with certain rights and privileges. However, they can be lost or stolen, leading to the need for recovery procedures. The types of shares that can be recovered include registered shares, bearer shares, redeemable shares, preference shares, cumulative preference shares, and convertible shares. The process of recovering shares can be challenging, and shareholders may need to provide evidence of ownership and follow specific procedures to recover their shares successfully. Understanding the different types of shares and the recovery procedures involved can help shareholders protect their investments and interests in the company. It is always advisable for shareholders to keep proper records and safeguard their share certificates to avoid loss or theft.

Also Read: Essential Directions on Recovery of Shares in India