Read everything about Shares
Meaning and All types of Shares best MBA notes
1.
What
is Share?
The capital of a company is divided into a number of equal
units. Each unit is called a share. The word share implies a unit of share
capital having property rights. The companies Act, 1956 defines a share as ‘‘a
share in the share capital of the company". A company may
divide its capital into share of Rs. 10 or Rs. 100 any suitable
amount. For example, the total capital of the company is Rs. 1, 00,000 parts in
Rs. 10 each. Each part of Rs. 10 will be called a share, or we can say that the
company has 10, 000 share of Rs. 10 each,
2.
The
nature of shares .
The
share of a company are moveable property in the manner provided by the article
of association. Share of a company are treated as goods under the Sales of
Goods Act, 1930, Shares can be bought, sold, hypothetical and bequeathed.
3.
Share,
Shareholder and Share certificate .
A share is
proportionate part of the share capital and forms the basis of ownership
interest in a company. In the words of Forwel, " A share is the interest
of a shareholder I the company measured by a sum of money."
The
person who contribute money (i.e., capital) through shares are known as
'shareholders'. They are the owners of the company. The company issues a
certificate to every shareholder stating the number of shares he holds. This
certificate is called a 'share
4.
The
Types of the Share:-
According to Indian
Companies Act, 1956 a company can issue two types of shares:
-
(1).
Preference
Share
(2).
Equity Share
1.
Preference
share: -
a) They have a right to
receive dividend at a fixed rate before any dividend is paid on the equity
shares;
b) On the winding up of
the company, they have the right to return of capital before anything is paid
to equity shareholders.
Normally
preference shareholders do not have right to vote.
However,
they have the right to vote on any resolution meant for winding up of the
company or for the reduction of share capital.
2.
Equity
share.
Equity shareholder have a Right to vote and participate in the management of
the company. They enjoy the reward as well as bear the risk of ownership.
The
Types of preference share:-
A.
Cumulative
preference shares?
B.
Non-cumulative
preference shares?
C.
Convertible
preference shares?
D.
Non-
convertible preference shares?
E.
Redeemable
preference shares?
a.
Cumulative
preference shares?
Cumulative shares are
those shares on which the arrears of dividend accumulate. If in any year, the
company does not earn sufficient profit, dividends on preference shares may not
be paid for that year. In case of cumulative preference shares such unpaid
dividend is treated as arrear. The arrears of dividend will accumulate. Such
accumulated dividends will be payable out of the profits of the subsequent
years. Dividend on equity shares can be paid only after the payment of such
arrears. Preference shares are always cumulative otherwise expressly stated in
the Articles of Association.
b.
Non-cumulative
preference shares?
Non-cumulative
preference shares are those shares on which arrears of dividend do not
accumulate as per Articles of Association. If there are no profits in any
years, the arrears of dividend cannot be claimed in subsequent years by this
type of shareholders. In fact, if the dividend on such shares is not paid by
the company during a particular year, the right to claim dividend lapses.
c . Convertible preference shares?
Convertible
preference shares are those shares which can be converted into equity shares
within a prescribed period as per terms of issue.
d.
Non-
convertible preference shares?
Preference
shares which cannot be converted into equity shares are called non-convertible
preference shares.
e.
Redeemable
preference shares?
Share capital means the capital raised by the issue of shares.
Infact, the capital of the company is divided into small units known as
'shares'. That is why, the capital of the company is called share capital. Hence,
the amounts invested by the shareholders towards the face value of shares are
collectively as ‘‘Share Capital’’.
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