How to Become a Shareholder in a Company

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How to Become a Shareholder in a Company

Preface: This post was originally published in 2022 and has been updated on September 15, 2025, to provide you with the most current and accurate information.

Shareholders are individuals or corporations that hold ownership in a company through the ownership of its stock. Shareholders are also known as stockholders and members of the company. In this blog post, we will explain how to become a shareholder in a company.

Eligibility for Becoming a Company Shareholder

The eligibility conditions for becoming a company shareholder are explained below:

• Should be 18 years of age or above, in case of individual shareholder.

• Minor individuals cannot enter a contract and as a result, they cannot own shares of a company directly. However, a guardian can own shares on behalf of a minor.

• The individual must be of sound mind and not be a lunatic.

• Shares can be held by an NRI or foreign national as long as they comply with FEMA and FDI guidelines.

• Shares can be held by the state government and central government through a governor and president, respectively. The governor/president is then empowered to nominate a representative who can attend company meetings on their behalf.

• A company can buy shares in another entity if permitted by its articles of association and regulations under S. 186 of Companies Act 2013. A company cannot just buy its own shares except via legally permitted routes of buy-back or capital reduction.

• A holding company can invest in subsidiary companies. However, a subsidiary company cannot own shares in its holding company, with limited exceptions. 

Different Ways to Become a Shareholder

There are three different ways through which an individual or company can become a company’s shareholder.

1. Making an Investment in a Pvt Ltd Company

To become a shareholder by making an investment in a pvt ltd company, the following steps are necessary:

• To become a pvt ltd company’s shareholder, consent from the board of directors must be obtained and a resolution needs to be passed. 

• Under corporate secretary’s provision, the stocks in a pvt company get recorded in a ledger.

• Upon discussion of price negotiation per number of shares, the amount gets dispatched to the company.

• The notes are then made on the ledger for the shares’ ownership. The share paper is signed by the owner and secretary and then is issued as a proof of ownership.

2. Purchasing Stock Via Broker

To become a shareholder by purchasing stocks via broker, the following steps are involved:

• To purchase shares, you need to place a ‘buy’ order. This can be done through a broker or an online brokerage platform. 

• If you are setting up a new account, you will need to have a minimum deposit before making any purchases.

• Determine your spending limit and check the price per share of the stock. For example, to buy 100 shares of ABC Company priced at Rs. 25 each, with a commission of 1 percent, you would need Rs. 2,500 for the shares and Rs. 25 for the commission, making the total cost Rs. 2,525 for the transaction.

3. Brokerage Firm

To become a shareholder through a brokerage firm, the process takes place in the following manner:

• Brokerage firms act as intermediaries that buy and sell stocks on behalf of investors. Online brokerage firms allow individuals to trade stocks at fixed prices but usually, they charge a commission per transaction.

• For example, on a deal worth Rs. 10,000, a brokerage charge often ranges from 0.01% to 0.5% of the trade value or a flat fee of a few rupees.

• Brokerage firms also usually provide market research and investment insights to their clients. 

Conclusion

A shareholder, also known as stockholder, is an individual or business entity that owns shares in a company. Shareholders are owners of the company. Even if an individual has only one share of a company, he is still one of the company owners/shareholders. To become a shareholder, there are different ways including investing in a pvt ltd co, purchasing stock via broker or through a brokerage firm. 

Frequently Asked Questions (FAQs)

Q1. Can an LLP own shares of a pvt ltd company?

A. Yes, an LLP can generally own shares of a private limited company.

Q2. Can a minor own shares of a company?

A. No, a minor cannot directly own a company’s shares. However, the guardians can own shares on the minors’ behalf.

Q3. Can a trust own shares in a company?

A. A trust cannot directly own shares in a company. However, the trustee can hold such shares on the trust’s behalf.

Q4. Can a holding company buy shares of its subsidiary company?

A. Yes, a holding company can usually buy shares of its subsidiary company.

Q5. How many shares do I need to purchase in a company to become its shareholder?

A. By purchasing just one share in a company, you can become its shareholder.

Q6. Can a private ltd co issue shares?

A. Yes, a pvt ltd co can issue shares. However, it cannot invite general public to subscribe to them. Instead, a pvt ltd co can issue shares to a limited number of people, such as business partners, friends or family members.

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