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Share capital means the capital raised by a

company by the issue of shares. The share capital of


company is always a definite amount divided in to
different shares.
Under the Companies Act, 1956, a company
can issue two types of shares.
(a) Preference shares
(b) Equity Shares
Preference shares are those which have a
preferential right for the payment of dividend during
the lifetime, a preferential right for the return of
capital when the company is wound up.
A company may issue the following types of
Preference Shares.
1. Cumulative Preference Shares
The dividend payable on these shares
goes on accumulating till it is fully paid off. The
accumulated dividend is paid to the Cumulative
Preference shareholders before any dividend is paid
to other types of shareholders.
2. Non-Cumulative Preference Shares
These are the shares on which the dividend
does not go on accumulating. If there are no profits or
there are inadequate profits in any year, these shares
get no dividend or a partial dividend.
3. Participating Preference Shares
When Preference shares participate like
equity shares in the profits of a company in addition to
their stated profits they are known as Participating
Preference Shares.
4. Non-Participating Preference Shares
These are entitled to only a fixed rate of
dividend and do not share in the surplus profits which
go to the equity share holders.

5. Convertible Preference Shares


The holders of the shares have a right to
convert them in to equity shares with in a certain
period.
6. Non-Convertible Preference Shares
The preference shares without a right of
conversion into equity shares are called Non-
Convertible equity shares.
7. Redeemable Preference Shares(Sec.80)
Ordinarily the capital that is raised by the
issue of shares can be returned the company only on its
winding up. But a company limited by shares, if
authorized by its articles, issue Preference shares which
are to be redeemed. Such shares are called redeemable
preference shares.
8. Irredeemable Preference shares
Irredeemable preference shares are those
shares which are payable at the winding up of the
company only.
Equity shares, with reference to any
company limited by shares , are those which are not
Preference shares[Sec.85(2)]. The holders of these
shares are entitled to dividend after the fixed dividend
on preference shares has been paid. The dividend to
equity shareholders will vary with the amount of
profits available for distribution.