Scribd
Upload
41 views18 pages

Shares 1

There are two main types of shares: equity shares and preference shares. Equity shares carry ownership rights and receive dividends only after preference shareholders. Preference shares have a preferential right to dividends at a fixed rate and repayment of capital over equity shares. Preference shares can be cumulative, redeemable, participating, convertible, or non-cumulative depending on their specific rights. Dividends are distributions of cash to shareholders that must be recommended by the board and approved by shareholders.

Uploaded by

cdarshak
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
41 views18 pages

Shares 1

There are two main types of shares: equity shares and preference shares. Equity shares carry ownership rights and receive dividends only after preference shareholders. Preference shares have a preferential right to dividends at a fixed rate and repayment of capital over equity shares. Preference shares can be cumulative, redeemable, participating, convertible, or non-cumulative depending on their specific rights. Dividends are distributions of cash to shareholders that must be recommended by the board and approved by shareholders.

Uploaded by

cdarshak
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 18

SHARE CAPITAL

KINDS OF SHARES
• Shares in the company may be similar i.e they may
carry the same rights and liabilities and confer on
their holders the same rights, liabilities and duties.

• Equity Share.

• Preference Share.
Equity Share
• The shares which are not preference shares are
known as equity shares.
• Dividend on equity shares is given only out of the
profit remaining after the distribution of the
interest to the debenture holders and the
dividend payment to the preference share
holders.
• At the time of liquidation of company, equity
shareholders have right of repayment of capital
only after returning preference share capital.
• Equity share holders are owners of the
company.
• They have the right to participate in the
management decisions.
• Equity share capital is the safest mode to
capture captial from the market.
• It is not compulsory to provide the dividend to
the equity share holders but all definitely
provides.
Preference Share
• Preference share is one which gives preferential
right to its holders for payment of dividend
during the lifetime of the company at the fixed
rate or fixed amount and preferential right for
return or repayment of capital when the
company goes into liquidation.
• It is not compulsory to pay dividend but they get
preference to the equity share holder.
• But the preference share capital is not so simple
as the equity share captial.
Types Of Preference Share
• Cumulative and Non - cumulative.

• Redeemable and Irredeemable.

• Participating and Non - participating.

• Convertible and Non – Convertible.


Cumulative and Non-
Cumulative
• Cumulative preference shares however gives
the right to the preference shareholders to
demand the unpaid dividend in any year
during the subsequent year or years when the
profits are available for distribution .
• In this case dividends which are not paid in
any year are accumulated and are paid out
when the profits are available.
• A non-cumulative or simple preference shares gives
right to fixed percentage dividend of profit of
each year. In case no dividend thereon is
declared in any year because of absence of profit,
the holders of preference shares get nothing nor
can they claim unpaid dividend in the subsequent
year or years in respect of that year.

• Preference shares are to be considered as


cumulative is there is no specific provision in
Articles.
Redeemable And Irredeemable
• Redeemable Preference shares are preference shares
which have to be repaid by the company after the
term of which for which the preference shares have
been issued.
• Maximum tenure of preference shares is 10 years.
• If a company is unable to redeem any preference
shares within the specified period, it may, with consent
of the Company Law Board, issue further redeemable
preference shares equal to redeem the old preference
shares including dividend thereon.
• Irredeemable Preference sharesmeans
preference shares need not repaid by the
company except on winding up of the
company.

• However, under the Indian Companies Act, a


company cannot issue irredeemable
preference shares.
Participating And
Non-participating
• Participating Preference shares are entitled to a
preferential dividend at a fixed rate with the
right to participate further in the profits either
along with or after payment of certain rate of
dividend on equity shares subject to terms of
participation.
• A non-participating share is one which does not
have such right to participate in the profits of
the company after the dividend and capital
have been paid to the preference
shareholders.
Convertible And Non-Convertible
• The preference shares which can be
converted partly or fully into equity shares as
per agreed terms are known as convertible
preference shares.

• The preference shares which are not convertible into


equity shares are known as non-convertible
preference shares.

• Usually the preference shares are non-convertible.


DIVIDENDS
• A dividend is a distribution of cash to shareholders.
The board of directors of a compnay recommends
payment of dividend and the shareholders approve the
payment by a declaration at the annual general
meeting of the company.
• Interim dividend is declared by the board during the
year.
• In addition to profits, the company must have
sufficient cash or other liquid assets so that the
dividend outgo does not affect its normal operations.
• The shares of a company are all the time bought
and sold in the market. After the dividend is
declared, the company fixes a date known as the
date of record, for the purpose of determining
the right of shareholders to receive the dividend.
• Dividends will be paid to those who hold the
shares on the date of record.
• Dividend are stated in terms of either percentage
of paid-up capital or so many rupees per share.
• Dividend are paid by means of a special cheque
known as dividend warrant. Dividends cannot be
paid in kind.

You might also like