2. A share is an interest having a money value and made up of
specified under the Articles of Association.
Income Tax v. Standard vacum Oil Co.
3. The holder of a share has certain
rights, duties and liabilities,
as stated in the Companies Act and in theMemo and Articles of a company:4. A share is
subject to regulations framed in the Articles of Association of thecompany.5. The shares or 4 her interest of a member in a company
is movable property,
transferable in-the manner provided by the articles of the company.-Sec. 82.6. The shares
must be numbered
so as to distinguish them from one another.-Sec. 83.
Classification of Shares
The Companies Act of 1956 provides that after the commencement of the Act, there can be only
of shares capital, viz.,(a) Equity Shares Capital, and(b) Preference Share Capital. Preference SharesPreference shares are those shares which are given, by the articles of the company, two privileges viz.,(i) priority in the payment of dividends over other share, and(ii) priority as regards return of the capital in the event of liquidation.-Sec. 85.The holder of a preference share is entitled to receive dividend (at rates fixed by the articles) before anydividend is declared on the other shares.In the event of winding up, if surplus assets are available, the preference shareholders must first be given back thr amount which they paid on the share. The balance is available for distribution to the other shareholders.The voting power of a preference shareholder is limited.
Preference Shares can be classified as stated below.
1. Cumulative or
In the case of cumulative preference shares, if the profit made by thecompany in a particular year is not sufficient to pay dividend at the prescribed rate, the shortage must bemade up out of the profits of succeeding years. The dividends accumulate. In non-cumulative preferenceshares such shortages are not required to be made up. Dividends which are not paid, do not accumulate butlapse.2.
Participating Preference Shares
Non-Participating Preference Shares :
In the former type of sharesthe shareholder gets a part of the surplus profits beyond the amount or rate prescribed for them, if suchsurplus profits are available. Sometimes such preference shareholders are given the right to share in thesurplus asset upon liquidation if any such assets are available. In the latter type of preference share, theshareholder cannot participate in the surplus profits or in the assets in liquidation.
3. Convertible Preference Shares
Non-convertible Preference Shares :
The former types of shares can beconverted into equity shares, provided there is provision of such conversion