share capital & types

8/2/2019 Share Capital & Types

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Topic : Share Capital Types OfShares

Submitted To:-

Mrs. J.J MainiLect. Of CLE

Head Dept. Mgmt.

Submitted By:-

Ashok KumarAmandeep Maan

MBA 3rd Sem.



Contents :

What are SHARES.

Kinds of Shares : Equity Shares

Preference Shares

Deferred Shares Kinds of Preference Shares



What are SHARES?

Definitions:

Sec 2(46) of THE COMPANIES ACT,1956:

“A share is a share in the share capital of a Company.”

Boreland Trustees v/s Steel Bros. & Co. Ltd.:

“A share represents the interest of a share holder in thecapital of the Company & this interest is measured by the

number of shares he is holding & the amount paid by him to

the Company on shares.”



Share Capital

• Share capital represents part of the capital invested in thecompany by its shareholders. It may also represent pastreserves of the company which have been ‘capitalized’ bya bonus issue of shares.

• Meaning of Share Capital: Share capital denotes theamount of capital raised by the issue of shares, by a

company. It is collected through the issue of shares andremains with the company till its liquidation.



Types Of Share Capital

Authorized capital

Issued capital

Unissued capital

Subscribed capital

Unsubscribed capital

Reserve capital



Kinds Of Shares :

The different kinds of shares which can beraised by Companies are :

EQUITY SHARES

PREFERENCE SHARES

DEFERRED SHARES



Equity Shares :

The equity shares or ordinary shares are those shares onwhich the dividend is paid after the dividend on fixed rate has

been paid on preference shares.

Characteristics:

No fixed rate of dividend. Dividend is paid after dividend at a fixed rate is paid onpreference shares.

At the time of liquidation, capital on equity is paid afterpreference shares have been paid back in full.

Non redeemable. Equity shareholders have voting rights & thus, control theworking of the Company.

Equity shareholders are the virtual owners of the Company.



Preference shares :

Preference shares are those shares which carry with thempreferential rights for their holders, i.e, preferential right asto fixed rate of dividend & as to repayment of capital at the

time of winding up of the Company.

Characteristics : Fixed rate of dividend.

Priority as to payment of dividend.

Preference as to repayment of capital during liquidation of the

Company. Generally preference shareholders do not have voting rights.

According to The Companies (Amendment) Act, 1988, thepreference shares are redeemable & the maximum period forwhich they can be issued is 10 years.



Kinds of Preference Shares :

On the basis of cumulation of dividend : Cumulative Preference Shares:

They are those shares on which the dividend at a fixedrate goes on cumulating till it is all paid.

Non Cumulative Preference Shares:

These are those shares on which the dividend does notcumulate.

On the basis of participation : Participating Preference shares:

This type of shares are allowed to participate in surplusprofits during the lifetime of the company & surplusassets during winding up.

Non Participating Shares:

These shares are not entitled to participate in surplus

profit. Dividend at fixed rate is given.



Kinds of preference shares :

On the basis of conversion : Convertible preference shares:The owners of these shares have the option to converttheir preference shares into equity shares as per theterms of issue.

Non-convertible preference shares:The owners of these shares do not have any right ofconverting their shares into equity shares.

On the basis of redemption: Redeemable preference shares:

These are to be purchased back by the company after acertain period as per the terms of issue. Irredeemable preference shares: These are not to be purchased back by the company duringits lifetime.



Deferred Shares :

Deferred shares are those shares on which the payment ofdividend and capital (at the time of winding up of a company) is

made after money is paid in full on preference shares andequity shares.

As per the provisions of the COMPANIES ACT,1956, no publiccompany can issue deferred shares.

Characteristics:

Rate of dividend is not fixed. It depends upon the availabilityof profits & the discretion of the Board of the Directors.

Dividend is paid after payment of dividend on equity &preference shares.

At the time of liquidation, capital on these shares is returnedafter capital is repaid on both preference & equity shares.



Thank you!!



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