NAME OF COLLEGE: SMT.

CHANDIBAI HIMATHMAL MANSUKHANI COLLGE

ACADEMIC YEAR:2012-13
SUBJECT:
CLASS-DIVISION:TYBCOM D
ROLL NO.:493
FULL NAME: SAWANTDESAI MITALI CHANDRASHEKHAR NEETA
MOBILE NO.:7276650028 RESI. NO.:8007848291
EMAIL ID:sawantdesai_mitali@rediffmail.com


There are different types of shares. I have mentioned about the most popular shares
which are as follows:-
Equity shares: These shares are also known as ordinary shares. They are the
shares which do not enjoy any preference regarding payment of dividend and
repayment of capital. They are given dividend at a fluctuating rate. The dividend on
equity shares depends on the profits made by a company. Higher the profits, higher
will be the dividend, where as lower the profits, lower will be the dividend.

Preference shares: These shares are those shares which are given preference as
regards to payment of dividend and repayment of capital. They do not enjoy normal
voting rights. Preference shareholders have some preference over the equity
shareholders, as in the case of winding up of the company, they are paid their capital
first. They can vote only on the matters affecting their own interest. These shares are
best suited to investors who want to have security of fixed rate of dividend and
refund of capital in case of winding up of the company.
(a) Cumulative Preference Share

If the company does no earn adequate profit in any year, dividends on preference
shares may not be paid for that year. But if the preference shares are cumulative
such unpaid dividends on these shares go on accumulating and become payable out
of the profits of the company, in subsequent years. Only after such arrears have
been paid off, any dividend can be paid to the holder of quality shares. Thus a
cumulative preference shareholder is sure to receive dividend on his shares for all
the years our of the earnings of the company.

(b) Non-cumulative Preference Shares

The holders of non-cumulative preference shares no doubt will get a preferential
right in getting a fixed dividend it is distributed to quality shareholders. The fixed
dividend is to be paid only out of the divisible profits but if in a particular year there is
no profit as to distribute it among the shareholders, the non-cumulative preference
shareholders, will not get any dividend for that year and they cannot claim it in the
next year during which period there might be profits. If it is not paid, it cannot be
carried forward. These shares will be treated on the same footing as other
preference shareholders as regards payment of capital in concerned.

(c) Redeemable Preference Shares

Capital raised by issuing shares, is not to be repaid to the shareholders (except buy
back of shares in certain conditions) but capital raised through the issue of
redeemable preference shares is to be paid back by the raised thought the issue of
redeemable preference shares is to be paid back to the company to such
shareholders after the expiry of a stipulated period, whether the company is wound
up or not. As per section (80) 5a, a company after the commencement of the
Companies (Amendment) Act, 1988 cannot issue any preference shares which are
irredeemable or redeemable after the expiry of a period of 10 years from the date of
its issue. It means a company can issue redeemable preference share which are
redeemable within 10 years from the date of their issue.

(d) Participating or Non-participating Preference Shares

The preference shares which are entitled to a share in the surplus profit of the
company in addition to the fixed rate of preference dividend are known as
participating preference shares. After the payment of the dividend a part of surplus is
distributed as dividend among the quality shareholders at a particulate rate. The
balance may be shared both by equity shareholders at a particular rate. The balance
may be shared both by equity and participating preference shares. Thus participating
preference shareholders obtain return on their capital in two forms (i) fixed dividend
(ii) share in excess of profits. Those preference shares which do not carry the right of
share in excess profits are known as non-participating preference shares.
Deferred shares: These shares are those shares which are held by the founders or
pioneer or beginners of the company. They are also called as Founder
shares or Management shares.
In deferred shares, the right to share profits of the company is deferred, i.e.
Postponed till all the other shareholders receive their normal dividends. Being the
last claimants of the profits, they have a considerable element of speculation or
uncertainty and they have to bear the greatest risk of loss. The market price of such
shares shows a very wide fluctuation on account of wide dividend fluctuations.
Deferred shares have disproportionate voting rights. These shares have a small
denomination or face value.
Deferred shares are not transferable if issued by a private company. Deferred
shareholders do not enjoy the right of priority to have shares offered in case of the
issue of shares by the company. If the company goes into liquidation the deferred
shareholders can get refund of capital and participate in the surplus capital, if any,
after the rights of preference and equity shareholders have been satisfied.

Bonus shares: The word bonus means a gift given free of charge. Bonus shares
are those shares which are issued by the company free of charge as bonus to the
shareholders. They are issued to the existing shareholders in proportion to their
existing share holdings. It is a kind of gift to the shareholders from the company. It is
bonus in the form of shares instead of cash. It is given out of accumulated profits and
reserves. These shares have all types of preferences which are available to the
existing shares. For example. Two bonus shares for five equity shares. The issue of
bonus shares is also termed as capitalization of undistributed profits.
Bonus shares is a type of windfall gain to the equity shareholders. They are
advantageous to the equity shareholders as they get additional shares free of cost
and also they earn dividend on them in future.
Conditions for issue of bonus shares:
(i) Sufficient amount of undistributed profits: There must be sufficient amount of
undistributed profits for the issue of bonus shares.

(ii) Provision in the articles: There must be a provision in the articles of association
regarding the issue of bonus shares. If there is a provision in the articles regarding
the issue of bonus shares the company can issue bonus shares if there is no
provision, the company cannot issue the bonus shares.

(iii) Suitable Resolution: The Board of Directors must pass a suitable resolution in
the Board meeting for the issue of bonus shares.

(iv) Shareholders approval: The shareholders must give formal approval for the
issue of bonus shares in the Annual General Meeting.

(v) When a company can issue: A company can issue bonus shares only twice in a
period of five years.

(vi) Fully paid up shares: Bonus shares can be issued only when the existing
shares are fully paid up.