SHARE CAPITAL

- ROMITH

INTODUCTION :

The units of fixed amount which are divided in to certain indivisible are called as SHARES.

SHARE means share in the share capital of a company.

The person having share in the company is called as SHARE HOLDER.

Prior to 1996, every share holder should get a share certificate.

SHARE HOLDERS have right to vote .They also have the right to profits of

the company , and they bear the losses too.

Profit distributed to the share holders is called DIVIDEND.

TYPES OF SHARES :According to companies Act (1956), a

company can issue two types of shares:

1. Preference shares 2. Equity shares

PREFERENCE SHARES:Preference shares carry special rights

with respect to the payment of dividend, repayment of capital on liquidation of the company , or both.

The dividends paid on these shares are fixed and are paid first.

When the company goes into liquidation , the repayment of capital should be paid first to these shares.

TYPES OF PREFERENCE SHARES:Cumulative preference shares:

The profits are accumulated paid. In case , the company is facing loss then the dividends accumulated on preferencible shares will be paid in the year when company gains profit .

Non-cumulative P. shares: These preferencible share holders do not get accumulated profits.

Participating P. shares : They enjoy voting rights

Non-participating P.shares: They do not enjoy voting rights.

Redeemable P.shares: Capital should be redeemed in some cases during life time of the organization.

Irredeemable P.shares: Here the capital is not payable during the life time of the business.

Convertible P.shares: These shares can be converted into Equity share holders after a certain period of time.

Non-convertible P.shares: These shares are not converted into equity shares.

EQUITY SHARES:

These are also called ORDINARY SHARES.According to companies act (1956) , the

shares which are not preference shares are EQUITY SHARES.

The rate of dividend of equity shares is not fixed , it will be fluctuate with company’s profits.

These share holders participate actively in the affairs of the company an they have a right to vote in AGM. These are governed by the Articles of Association.