Share capital and types

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2. 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. 3. 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. 4. TYPES OF SHARES : According to companies Act (1956), a company can issue two types of shares: 1. Preference shares 2. Equity shares 5. 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. 6. 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 7. 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. 8. Non-convertible P.shares: These shares are not converted into equity shares. 9. 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 companys 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.