Presented by

Ankur Srivastava
IBMR-IBS, Bangalore
A share in the share capital of a company, and
includes stock except where a distinction
between stock and share is expressed or
implied.

In other words, a share in a company is one of

the units in which the total capital of the
company is divided.

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Example: If the capital of a
company is 10000 and is divided
into 1000 units of Rs10 each,
each unit of Rs.10 shall be called
a share of the company.

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 SHARES
 SHARES
DEFERRED
PREFERENCE EQUITY
SHARES

CUMULATIVE NON-CUMULATIVE

PARTICIPATING
PARTICIPATING
OR
OR NON-PARTICIPATING
NON-PARTICIPATING

CONVERTIBLE CONVERTIBLE
OR OR
NON-CONVERTIBLE NON-CONVERTIBLE

REDEEMABLE
OR REDEEMABLE
IRREDEEMABLE OR IRREDEEMABLE

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Such shares enjoy some preferential right:
1: As to the payment of dividend at a fixed rate
during the life of the company.
2: As to the return of capital winding up of the
company.
If any share carry only one of above these two
preferential rights, they will be treated as
equity shares.

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They do not enjoy normal voting right like
equity share holders, they are however entitled
to vote in following two cases:
When any resolution directly affecting their
rights is to be passed.
When the dividend due (whether declared or
not) on their preference shares or part thereof
has remain unpaid.

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Cumulative preference shares
Non-cumulative preference shares
Participating preference shares
Non-participating preference shares
Convertible preference shares
Non-convertible preference shares
Redeemable preference shares
Irredeemable preference shares

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 These shares carry the right to receive the
whole of surplus profits after the preference
shares, if any.
 Further, directors have the sole right of
recommending dividends to such shares and as
such they may not get any dividends in case
the director choose so.
 Holders of equity shares are the actual owners
of the company.

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 They have voting rights in the meeting of the company.
 They have a control over the working of the company.
 Equity share holders are paid dividend after paying it to
the preference share holders.
 The rate of dividend on these shares depends upon the
profits of the company. They may be paid a higher rate of
dividend or they may not get anything.
 These share holders take more risk as compared to
preference share holders.
 Equity capital is paid after meeting all other claims
including that of preference share holders.
 They take risk both regarding dividend and return of
capital.
 Equity share capital can not be redeemed during the life
time of the company.

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 •Advantage •Disadvantage
•Equity shares do not create any obligation to •If only equity shares are issued the company
pay a fixed rate of dividend. can not take the advantages of trading on
equity.
•Equity shares can be issued without creating •As equity capital can not be redeemed there
any charge over the assets of the company. is a danger of overcapitalization.

•It is a permanent source of capital and the •Equity share holders can put obstacles in
company has not to repay it except under management by manipulation and organizing
liquidation. themselves.

•Equity share holders are the real owners of •During prosperous periods higher dividends
the company who have the voting rights. have to be paid leading to increase in value
of shares in the market and speculation.

•In case of profits equity share holders are
the real gainers by way of increased
dividends and appreciation in the value of
shares.
•Investors who desire to invest in safe
securities with a fixed income have no
attraction for such shares.
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 •Preference shares
•These shares are entitled to a fixed rate
of dividend.
•Dividend on these shares is paid in
preference to the equity shares.
•Redeemable preference shares may be
redeemed by the company.
•The voting rights of these shares are
restricted.
•The preference shares have preference
to equity shares with regard to payment
of capital on winding up.
•Equity shares
•The rate of dividend on equity shares
depends upon the amount of profit
available and the funds requirements of
the company for future expansion etc.
•The dividend on equity shares is paid
only after the preference dividend has
been paid.
•Equity shares can not be redeemed
except under a scheme involving
reduction of capital or buy back of its
own shares.
•An equity share holder can vote on all
matters affecting the company.
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 They are also known as “founder shares", since
they are often held by the promoter of the
company.
 They are issued as other ordinary shares and
gets a fixed dividends just like preference
shares.
 But they are the last to receive both as regards
dividends and repayment of capital.

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 Certain restriction on public companies
regarding allotment of shares, may be
discussed under the following heads:
 When no public offer is made
 When public offer was made

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 Where a public company having a share capital
does not offer shares to the public, it need not
issue a prospectus. In such case it shall not
proceed to allot shares unless at least three
days before the first allotment it has filed with
the registrar for registration a statement in lieu
of prospectus.

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In case when public company offers shares to
the public for subscription, the provisions
relating to allotment may be studied under the
following heads:
First allotment of shares
Subsequent allotment of shares

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A public company can make the first allotment
only after two years of the formation of the
company, and should comply with certain
restrictions:
 Registration of the prospectus

 Minimum subscription

 Application money

 Effect of irregular allotment

 Shares to be dealt in on a stock exchange

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In case of subsequent allotment of shares
Offered to the public for subscription by a
public company, all the special provisions
applicable to ‘first allotment of shares’
discussed above apply, except the provision
relating to:
Minimum subscription [sec, 69(1)], and
Deposit of application money in a schedule
bank

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Shares can be issued at par

Shares can be issued at premium

Shares can be issued at discount

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Every person whose name is entered as a
member of a company has a right to receive a
certificate of his share.
A share certificate shall be under the seal of
the company and shall specify:
The shares to which it relates
The amount paid up thereon
The name, address, and occupation of the share
holder.
Should be signed by atleast 2 directors and
secretary.

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A share warrant is a document issued by a
public company stating that its bearer is
entitled to the shares specified therein.
A public company limited by shares may
convert its fully paid-up shares into share
warrants.
Advantage of issuing share warrants is that
shares can be transferred by mere delivery of
warrant.

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Issue Receipt / acknowledgement
Use the prescribed format of covering letter
bear a unique serial number
Must affix date receipt stamp
Shall return share certificates and transfer with
prescribed time of one month

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Not impound certificates
Dispatch after realization of the stock invest
Ensure adequate security marks
Signature difference
- Original transfer deed
- Original Certificate
- Original objection memo with the
reason

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