Nepali Stock Market Basic Terms


Authorized capital, issued capital and paid up capital

Authorized capital means the maximum limit that a company can increase its issued capital. There is a legal provision that such maximum limit can be increased by amending the management letter of the company.
Issued capital refers to the capital that a company aims to raise from shareholders. The shareholders have expressed their commitment to raise capital accordingly.

Paid up capital refers to the total capital paid up by the shareholders out of the capital pledged by the shareholders issued by the company. For example, if the shareholders pay only Rs 50 per share for the shares issued at the rate of Rs 100 per share, then the paid up price is Rs 50 per share.

Buy and sell securities

Securities can be purchased when companies issue securities. It is said to have bought securities from the primary market. Securities are usually bought and sold at face value in this market. Companies with a strong financial position can also sell at a premium by adding extra money to the face value.

Arrangements are made to sell securities purchased from companies in the primary market. Such an arrangement is called a secondary market. Stock exchanges act as a secondary market.
Securities are traded on stock exchanges at prices determined by market demand and supply. Share trading on the stock exchange is done through member brokers. Those who buy and sell securities have to pay commission to the broker.

Buying and selling securities in the primary market

Publicly issued securities The public should fill out an online application by going to stating the number and amount of securities they want to take.
Before applying for the purchase of securities, the investor should have opened an account in the bank providing ASBA (Application Supported Blocked Amount) facility and availed the online facility, while the Demat account should have been opened in the Depository Participant of CDSC. The investor’s securities in the demat account are intangible.

What are the types of securities?

There are several grounds for classifying securities. There are three main types of securities based on returns and risks. High profit and high risk securities. Shares fall into this category. Preferred shares, institutional bonds (debentures), group plan units can be placed in the middle profit and medium risk category. Government bonds can be placed in the category of low risk and low return.

Securities can also be classified on the basis of the liability of the organized entity and the rights over the returns it distributes. Securities are bonds issued at a fixed rate (interest) to donors. In case of dissolution of the company, the first to receive payment is the bondholders.

Distribution of ordinary shares to shareholders is not pre-determined. In case of dissolution of the company, it is the shareholders’ turn to take payment. Preference shares can generally be taken as bonds and securities with mixed properties of ordinary shares. In the return distributed by the company, the right of the shareholder comes first than the ordinary shareholder.


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