BUSINESS &

SHARE CAPITAL

-gaurav kumar

mba 1st year(e)

gla university (mathura)

Types of Business

SOLE PROPRIETORS

HIP

PARTNERSHIP FIRM COMPANY

SOLE PROPRIETORSHIP

• SOLE PROPRIETORSHIP UNDER WHICH AN INDIVIDUAL CONTRIBUTES CAPITAL. HE EARNS PROFIT OR BEARS THE LOSSES HIMSELF AND HIS LIABILITY IS UNLIMITED.

PARTNERSHIP FIRM:

• PARTNERSHIP IS AN AGREEMENT BETWEEN TWO OR MORE PERSONS WHO HAVE AGREED TO SHARE PROFITS AND LOSSES OF THE BUSINESS CARRIED ON BY ALL OR ANYONE ACTING UPON ALL.

Best example of partnership firm

FEATURES OF PARTNERSHIP FIRMS

THERE SHOULD BE AN AGREEMENT BETWEEEN TWO OR MORE PEOPLE WHO WILL BE CALLED AS PARTNERS.

PROFIT/LOSS WILL BE SHARED IN THE AGREED PROPORTION.

LIABILITY OF THE PARTNERSHIP FIRMS WILL BE UNLIMITED.

THE RELATION OF PRINCIPAL AND AGENT WILL BE EXISTING AMONG THE PARTNERS.

COMPANYAccording to the companies act 2013, sec 2(20) says:-“company means a company incorporated under this

act or under any previous company law” A company can be defined as “an artificial person created by law, having

a separate legal entity, with perpetual succession and common seal.“

Features of a Company Separate legal existence Perpetual succession Limited liability Transferability of shares Common seal Separation of ownership and control Artificial legal person

Kinds of Company

• Statutory Company: These companies are formed by a special Act passed either by Central or State Legislatures. EX.: RBI, SBI, IDBI

• Government Companies: A company which not less than 51% of the share is held by Central or State Government.

• Foreign Companies: A company which is incorporated outside India and has a place of business in India

Registered Companies According to companies act 2013, section 2(68) says:-

1. Private Companies: Private Company can be defined as company which has a minimum paid up capital of Rs.1 lakhs or such higher capital as may be prescribed and which by its articles:

Characteristics:• Restricts the right of its members to

transfer shares• Limits the number of members to 200,

excluding present and past employees of the company who are the members of the company .

• Prohibits any invitation to the general public to subscribe for its shares or debentures.

• Prohibits any invitation of acceptance of deposits from other than members, directors or their relatives.

Registered Companies According to companies act 2013, section 2(71) says:-

2. Public Company means a company which

is not a private company has a minimum paid up capital of Rs. 5

lakhs or such higher paid up capital as may be prescribed.

A Public Company needs minimum seven persons for its registration.

SHARE CAPITALShare Capital

Share capital of the company is the capital contributed by the shareholders. This is the real capital of the company. The share capital is divided into shares which is normally at Rs.10 per share.

Types of Share Capital• Authorized Capital• Issued Capital & Subscribed Capital (Under-

subscribed / Over-subscribed)• Called up Capital• Paid Up Capital

What are SHARES?Definitions:

Sec 2(84) of THE COMPANIES ACT,2013:“A share is a share in the share capital of a Company

andIncludes stock”.

Boreland Trustees v/s Steel Bros. & Co. Ltd.:“A share represents the interest of a share holder in

the capital of the Company & this interest is measured by the number of shares he is holding & the amount

paid by him to the Company on shares.”Thus, the amount of capital to be raised by a Company

is always divided into small parts or units of equal value & these units are called SHARES

Kinds Of Shares :

The different kinds of shares which can be raised by Companies are :

EQUITY SHARES PREFERENCE SHARES

Equity Shares :The equity shares or ordinary shares are those shares on which the dividend is paid after the dividend on fixed rate

has been paid on preference shares.Characteristics: No fixed rate of dividend. Dividend is paid after dividend at a fixed rate is paid on preference shares. At the time of liquidation, capital on equity is paid after preference shares have been paid back in full. Non redeemable. Equity shareholders have voting rights & thus, control the working of the Company. Equity shareholders are the virtual owners of the Company.

Preference shares :Preference shares are those shares which carry with them

preferential rights for their holders, i.e, preferential right as to fixed rate of dividend & as to repayment of capital at the

time of winding up of the Company.Characteristics : Fixed rate of dividend. Priority as to payment of dividend. Preference as to repayment of capital during liquidation of the Company. Generally preference shareholders do not have voting rights. According to The Companies (Amendment) Act, 2013, the preference shares are redeemable & the maximum period for which they can be issued is 10 years.

Kinds of Preference Shares :

On the basis of accumulation of dividend :

Cumulative Preference Shares:They are those shares on which the dividend at a fixed rate goes on cumulating till it is all paid. Non Cumulative Preference Shares:These are those shares on which the dividend does not cumulate.

On the basis of participation : Participating Preference shares:This type of shares are allowed to participate in surplus profits during the lifetime of the company & surplus assets during winding up. Non Participating Shares:These shares are not entitled to participate in surplus profit. Dividend at fixed rate is given.

Kinds of preference shares :

On the basis of conversion : Convertible preference shares:The owners of these shares have the option to convert their preference shares into equity shares as per the terms of issue. Non-convertible preference shares:The owners of these shares do not have any right of converting their shares into equity shares.

On the basis of redemption: Redeemable preference shares:These are to be purchased back by the company after a certain period as per the terms of issue. Irredeemable preference shares:These are not to be purchased back by the company during its lifetime.

Thank you!!

Queries, if any, you are welcome.