Presented byPoornima

&Nanda Kumar

Definition Of Shares

A share is the interest of a shareholder in a company. The capital of a company. Share means share in the share capital of a company. It includes stock except where a distinction between stock and share is expressed or implied [Sec.2(46)].

A share has also been defined as “an interest having a money value and made up of diverse rights specified under the Articles of Association”. And in this sense it may be defined as a “bundle of rights and obligations”.

Kinds Of Shares

Preference shares & Equity shares

Equity Shares

Equity share are also called common stock/share or ordinary shares, investment in share. Equity shares are considered to be mere risky than both bonds and preference shares. They, however, afford greater advantage than both the other securities and in the capital market enjoy a better position as for as the investor attraction is concerned.

Equity share gives several rights to shareholders. They have voting rights, rights of dividend, the rights of being offered right shares, the right of bonus issues and certain tax benefits.

Characteristics Of Equity Shares

Voting rights. Ownership rights. Par value. Right shares. Tax benefits.

Voting rights

A specific right of voting the members owning equity shares to receive the notice. Right to be elected from the members of the executive committee become the director of the company on purchasing shares.

Ownership rights

The equity share holders are also the owners of the firm. Each stock holders receives an ownership right equivalent to the stock that he holds in the firm. Every stock holder has the right to be a member of the company.

Par Value

An equity share has a face value or par value. Equity share may also be sold or issued at a premium or at a discount but the face value will be denomination. It shows the liability of an investor.

Right shares

The share holders has a right of receiving additional shares whenever they were issued by the company.

Tax Benefits

Up to Rs.7000 interest can be deducted under section 80c to calculate the total income of a person. But sometimes when the company is new, the investor can benefit of his holding in equity stock of new firms under section 80cc. Income in the form of dividends in the new undertakings is deductible before paying the tax for the first 5 years of the existence.

Preference Share

Preference share

Preference shares capital is the sum of total of preference share. These shares carry the following preferential rights over equity shares.

As regards dividends, to be paid a fixed amount or an amount calculated at a fixed rate.

On winding up of the company, to return capital paid up.

Kinds Of Preference shares

Cumulative & Non-cumulative preference shares

Participating & Non-Participating preference shares.

Redeemable & Non-Redeemable preference shares

Convertible & Non-convertible preference shares

Cumulative preference share

These shares are entitled to fixed dividends whether there are profits are no profits. If they are sufficient to pay dividends in a year, then the dividends are accumulated and paid in succeeding year.

Non-cumulative preference share These types of shares are

also entitled to fixed dividends, but profits are not sufficient or losses in a particular year and the dividends are not declared, these shares are not entitled to arrears of dividends in succeeding year.

Redeemable preference share

Shares which can be purchased back by the company are called redeemable preference share. The company reserves its right to call back or purchase shares at any time subject to the articles of association.

Non-Redeemable preference shares

These shares cannot purchased back by the company. After the commencement of the Company's Act 1998, no company limited by shares shall issue non-redeemable preference shares

Participating & Non-Participating preference

shares These shares have right to share in the surplus profits of the company besides the fixed dividends.

Where as non-participating preference share does not have right to share in the surplus profits of the company besides the fixed dividends.

Convertible & Non-convertible preference

shares These shares may be converted

into equity shares Where as non convertible

preference shares cannot be converted into equity shares.

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