share, capital & borrowing

8/8/2019 Share, Capital & Borrowing

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Presented by:

Aveenash

Shahneel

Vijay



Shares.Certificate representing one unit of ownership in a

corporation.



Types of shares:y There are basically two types of shares:

y Equity shares (Common shares)

y Preference shares



Equity Sharesy They are ordinary shares with no guarantee of

dividend and possessing voting rights. Equity shares

gain maximum returns when there are high profits.



Preference sharesy provides the preferential right regarding dividend,

which is paid at fixed rate.

y Provides precedence in terms of liability over commonstock in the event of winding up.



Types of preference shares Cumulative and Non-cumulative:

Cumulative: Preferred stock on which dividends

accrue in the event that the issuer does not maketimely dividend payments.

NonCumulative: A non-cumulative or simplepreference shares gives right to fixed percentagedividend of profit of each year.



Redeemable and irredeemabley R edeemable are preference shares with the expressed

condition that issuing company has the right to

repurchase shares as specified.y Irredeemable are preference shares which need not to

be repaid by company except in case of winding up.



Participative & non participative

preference sharesIn participative preference shares the owner is entitled to

fixed rate of dividend along with the right to

participate further in future profits.

In non participative preference shares the owner has noright over the further future profits after dividends

have been distributed.



SHARE CERTIFICATEy Stock certificate (also known as certificate of stock orshare certificate) is a written document signed on

behalf of a corporation, and serves as legal proof of ownership of the number of shares indicated.



y Part 2:

y Shahneel Ahmed



Borrowingy Borrowing: R eceiving something of value in exchange for an obligation to pay

back something of usually greater value at a particular time in the future.

y Companies borrow money to aid short term and long term cash flow.

T ypes:

y Debentures and bonds

y Loans and banks and financial institutionsy Acceptance of deposits



Debenture

y Debenture means a document which either creates a debt or acknowledges it.

y Debenture is a certificate of loan issued by the company acknowledging the

indebtedness of the company.

y Debentures are usually long term and unsecured debt security.



Loans from banks

y

A bank loan is an extension of credit, to a consumer or business, in theform of borrowed funds which has to be paid back with interest.

y Usually for short term, to be repaid with interest on or before a fixesdate.



Types of share capital



Types of share capital

y A uthorized Capital: Authorized capital is the amount of share capital which a company is authorized to issue by its MEMOR ANDUM OF ASSOCIA TION. The company cannot raise more than the amount of

capital as specified in the Memorandum of Association.

y Issued Capital: It is that part of the authorized capital which isactually issued to the public for subscription including the sharesallotted to members.The authorized capital which is not offered forpublic subscription is known as unissued capital. Unissued capitalmay be offered for public subscription at a later date.



y Subscribed Capital: It is that part of the issued capital which has been actually subscribed by the public. meansthat part of the issued capital at nominal or face value which has been subscribed or taken up by purchaser of

shares in the company and which has been allotted.



y Called-up Capital: It is that part of the subscribed capital which hasbeen called up on the shares to pay the balance. The company may decide to call the entire amount or part of the face value of the shares.For example, if the face value (also called nominal value) of a shareallotted is R s. 10 and the company has called up only R s. 7 per share, inthat scenario, the called up capital is R s. 7 per share. The remaining R s.3 may be collected from its shareholders as and when needed.

yPaid-up Capital: means the total amount of called up share capital which is actually paid to the company by the members. If any of theshareholders has not paid amount on calls, such an amount may becalled as calls in arrears. Therefore, paid-up capital is equal to thecalled-up capital minus call-in-arrears.



y Uncalled Capital: That portion of the subscribed capital which has not yet been called-up. As stated earlier, thecompany may collect this amount any time when it needsfurther funds.

y

y R eserve Capital: A company may reserve a portion of itsuncalled capital to be called only in the event of winding

up of the company. Such uncalled amount is called R eserveCapital of the company. It is available only for the creditorson winding up of the company.



y Part 3:

y Vijay



A debenture is a document or a certificate of loan issued by the company either creates a debt or acknowledges.

the term is used for a medium- to long-termdebt instrument used by large companies to borrow money.

Examples:Term finance certificates, bonds, loan stock,

engro rupya certificates etc.



Types of debentures

y There are two types of debentures

y 1.Convertible debentures

y 2.Non-convertible debentures

Convertible debentures:

y bonds that can be converted into equity shares of theissuing company

Non-convertible debentures:

Which are simply regular debentures, cannot be convertedinto equity shares.



Features of debentures

y It is an acknowledgement of indebtedness of thecompany to its holder for the amount stated in thecertificate.

y Issued under seal of the company y Fixed percentage is on specified principle amount

y Holder has no right to voting

y Fixed maturity time period



Difference b/w shares and debentures

Debenture sample



Share sample



y Shares are part of the equity shares while

y Debentures are part of the loan

y Fixed dividend percentage is paid on debentures

y No fixed dividend

y Debentures have a charge on the assets

y While Shares have no charge



y Interest is payable on debentures whether the profit is

made or not.y In shares dividends are paid from profits only

y Debentures do not carry voting rights but convertibledebentures may at the option of a company

y Debentures are redeemed

y But shares cannot be bought back

share, capital & borrowing

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