Classification of Share Capital

There are two different classes of share capital. They are:

 Equity Share Capital
 Consisting only of equity shares and sans preference shares, this class carries the
maximum benefits and also maximum losses. If a company’s shares are doing well on the
Stock Exchange, shareholders will benefit as their company will pay extra dividends.
Plus, their shares will also have higher resale values.
 However, if an organisation loses money, its equity shareholders have to bear the burden
of losses. At times, they might even have to sell their shares at below-par values. It is this
risk-factor that many prospective shareholders cannot stomach. 
 Note that those who hold equity shares are eligible to vote at every organisation’s Annual
General Meetings or AGMs.
 Preference share capital 
 It consists only of preference shares. As the name suggests, those who hold preference
shares receive preferential treatment. These extra advantages are laid out clearly under
Section 43(b) of the Companies Act (2013).
 Preferential shareholders have the right to receive dividends before an equity shareholder.
They are, indeed, treated differently. Note that if a certain company is running in losses
and is unable to issue dividends, preferential shareholders will also receive no extra
bonuses.
 Furthermore, preference shareholders are eligible to receive their share of a company’s
capital if the organisation winds up. 
In case of companies, the terms ‘capital’ and ‘share capital’ have been held to be synonymous. Capital to
be stated in the Memorandum of Association and Articles of Association of the Company. The share
capital of company may be of the following types: o start with the classification of share capital it is
important to understand the meaning of certain terminology which plays an important role if we start
digging deep inside the Company Law. As per the bookkeeping, the term ‘ capital ’ means the sum of
money which acts as