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under sec. higher will be the dividend and lower the profits. Higher the profits. . They are also called as ordinary shares.• DEFINITION • A “share” has been defined by the Indian Companies Act. Equity shareholders are paid dividend out of the profits made by a company. These share holders do not enjoy preference regarding payment of dividend and repayment of capital.2(46) as “A share is the share in the Capital of the Company”. • Meaning: Equity shares are those shares which are ordinary in the course of company's business. lower will be the dividend.

• (4) Attached rights: A share gives its owner the right to receive dividend. the right to vote. • (2)Fixed value or nominal value: Every share has fixed value or a nominal value.which indicates a fixed value or a nominal value. . • (3) Distinctive number: Every share is given a distinct number just like a roll number for the purpose of identification. the right to attend meetings. the right to inspect the books of accounts.Features of Equity Shares: • (1) Owned capital: Equity share capital is owned capital because it is the money of the shareholders who are actually the owners of the company. the price of a share is Rs. 10/. For example.

Higher the profits. the equity shareholders are given certain rights in the company. In case they do not take up the shares offered to them. Thus. that is if a person buys shares of a particular company and he does not want them. thereby transferring the shares in the name of that person. . he can sell them to any one. Dividend depends on the profits made by a company. (7) Benefit of right issue: When a company makes fresh issue of shares. equity shareholders get the benefits of the right issue. the same can be issue to others. The company has to offer the new shares first to the equity shareholders in the proportion to their existing share holding.• (5) Return on shares: Every shareholder is entitled to a return on shares which is known as dividend. (6) Transfer of shares: Equity shares are easily transferable. higher will be the dividend and vice versa.

High rate of dividend is paid with high rate of profit. issue bonus shares to their ordinary shareholders out of the accumulated profits.• (8) Benefit of Bonus shares: Joint stock companies which make huge profits. higher the rate of dividend. equity shareholders get the benefits of the right issue. Thus. (i. the same can be issued to others. the shareholders capital is appreciated through an appreciation in the market value of shares. The market value mainly depends upon profitability and prosperity of the company. (9) Irredeemable: Equity shares are always irredeemable.e. This means equity capital is not returnable during the life time of a company. (10)Capital appreciation: The nominal or par value of equity shares is fixed but the market value fluctuates. higher the market value of the shares.) . These shares are issued free of cost in proportion to the number of existing equity share holding. In case they do not take up the shares offered to them.

it is required to file a “Statement in lieu of Prospectus” with the register of companies. However. The Prospectus contains relevant information like names of Directors. amount payable on application. .PROCEDURE FOR ISSUE OF SHARES • (a) Issue of Prospectus: Whenever shares are to be issued to the public the company must issue a prospectus. terms of issue. on allotment & the earliest closing date of the subscription list. Even a Public Company issuing it‟s shares privately need not issue a prospectus. Prospectus means an open invitation to the public to take up the shares of the company thus a private company need not issue prospectus. etc. It also states the opening date of subscription list.

. • Over Subscription: If the no. • Under Subscription: If the no. of shares offered to the public then it is called as Under Subscription.• (b) Application of Shares: A person intending to subscribe to the share capital of a company has to submit an application for shares in the prescribed form. of shares offered to the public then that is called as over Subscription. to the company along with the application money before the last date of the subscription mentioned in the prospectus. of shares applied for is more than the no. of shares applied for is less then the no.

of shares allotted with the distinctive numbers. Letters of Regret are sent to those who are not allotted any shares & application money is refunded to them. Procide with the allotment work. the Directors. However.• (c) Allotment of Shares: After the last date of the receipt of applications is over. a company cannot allot the shares unless the minimum subscription amount mentioned in the prospectus is collected within a stipulated period. The Directors pass resolution in the board meeting for allotment of shares indicating clearly the class & no. Then Letters of Allotment are sent to the concerned applicants. .

• Pro-rata Allotment: When a company makes a pro-rata allotment. refunds their application money & allots the shares to the remaining applicants.• Partial Allotment: In partial allotment the company rejects some application totally. If a person has applied for three hundred shares he may get two hundred shares.g. . it allots shares to all applicants but allots lesser shares then applied for E.

Such installments are called calls on Shares. Second Call.” • (e) Calls–in–Arrears: some shareholders may not pay the money due from them. etc. The Balance of calls-in-arrears account is deducted from the Called-up capital in the Balance Sheet.• (d) Calls on Shares: The remaining amount of shares may be collected in installments as laid down in the prospectus. First Call. They may be termed as “Allotment amount. . The outstanding amounts are transferred to an account called up as “Calls-in-Arrears” account.

• (f) Calls–in–Advance: According to sec. accept from a shareholder either the whole or part of the amount remaining unpaid on any shares held by them. interest has to be paid on such calls in advance. as Calls in advance. . a Company may if so authorized by it‟s articles.92 of the Companies Act. No dividend is paid on such calls in advance. However.

• (a) Issue of Shares for Consideration other than cash or for cash or on capitalization of reserves. at more than face value. .• TERMS OF ISSUE OF SHARES: • A limited company may issue the shares on following different terms.e. at face value or at nominal value.e. at less than the face value. • (c) Issue of Shares at a Premium i. • (b) Issue of Shares at par i.e. • (d) Issue of Shares at a Discount i.