Presentation Manas Hadkar

SHARES AND
SHARE CAPITAL
WHAT IS A SHARE?
• A share in a company is one of the units into which the total
share capital of a company is divided.
• In simple Words, a share or stock is a document issued by a
company, which entitles its holder to be one of the owners of
the company. A share is issued by a company or can be
purchased from the stock market.
TYPES OF SHARES
• Equity Shares
• Preference Shares
Equity Shares/Common Shares/Ordinary Shares :
• These shares are the most commonly traded shares, and they give you
a vote in company matters.
• They earn a dividend as long as the company is earning money, and
this dividend directly corresponds to the profit made by the company.
• High profits mean high dividends for you. Ordinary shares have no
special rights or restrictions.
• Whilst they have the highest risk, they also have the potential to bring
the biggest financial gains.
Preference Shares :
Preference Shares are those which carry following
preferential rights:
- A preferential right in respect of a fixed dividend
which may be a fixed amount or a fixed rate.
- A preferential right to repayment of capital in the
event of company’s winding up.
Preference Shares are of the following
types:
• Cumulative or Non-cumulative :
Cumulative Preference Shares give the right to the preference
shareholders to demand the unpaid dividend in any year during the
subsequent year or years when the profits are available for
distribution .
In this case dividends which are not paid in any year are
accumulated and are paid out when the profits are available.
A Non-Cumulative or Simple Preference Shares gives
right to fixed percentage dividend of profit of each year.
In case no dividend thereon is declared in any year
because of absence of profit, the holders of preference
shares get nothing nor can they claim unpaid dividend
in the subsequent year or years in respect of that year.
Participating Preference Shares and Non-
Participating Preference Shares :
• Participating Preference Shares are entitled to a preferential

dividend at a fixed rate with the right to participate further in
the profits either along with or after payment of certain rate of
dividend on equity shares.
• A Non-Participating Share is one which does not such right to
participate in the profits of the company after the dividend and
capital have been paid to the preference shareholders.
• Redeemable Preference Shares:
The shares which can be redeemed after a fixed period of time
or after giving prescribed notice, as desired by the company
are known as Redeemable Preference Shares.
• Irredeemable Preference shares:
These shares can not be redeemed during the lifetime of the
business.
Convertible and Non-Convertible Preference Shares:
• The holders of Convertible Preference Shares have a right to get

their shares converted into equity shares within a certain period of
time.
• The holders of Non-Convertible Preference Shares do not have the

right to get their shares converted into equity shares.
SHARE CAPITAL
1. Nominal, Authorised or Registered Capital means the sum
mentioned in the capital clause of Memorandum of Association. It is
the maximum amount which the company raise by issuing the shares
and on which the registration fee is paid. This limit is cannot be
exceeded unless the Memorandum of Association is altered.
2. Issued Capital means that part of the Authorised Capital which
has been offered for subscription to members and includes shares
alloted to members for consideration in kind also.
3. Subscribed Capital means that part of the issued capital at nominal or face
value which has been subscribed or taken up by purchaser of shares in the
company and which has been alloted.
4. Called-up Capital means the total amount of called up capital on the shares
issued and subscribed by the shareholders on capital account.
i.e if the face value of a share is Rs. 10/- but the company requires only Rs. 2/- at
present, it may call only Rs. 2/- now and the balance Rs.8/- at a later date. Rs. 2/- is
the called up share capital and Rs. 8/- is the uncalled share capital.
5. Paid-up Capital means the total amount of called up share capital which is
actually paid to the company by the members.
Shares may be issued by a joint stock
company for the following considerations:
-
1) Issue at par
2) Issue at premium
3) Issue at discount
• UNDERSUBSCRIPTION
A company may not receive applications for all the shares offered by it to the
public. Such situation is called as Undersubscription.
• OVERSUBSCRIPTION
When company receives applications for more number of
shares than the number of shares offered to the public for
subscription it is a case of Over subscription.
A company cannot allot more shares than what it has offered.
RIGHT SHARES
Rights issues are the shares issued by a company only to its existing
shareholders.
Sometimes companies come out with a batch of new shares and may
choose not go to the public (like IPO).
Company may just approach only the existing shareholders (those who
own the shares of that company).
These shares are called a rights issue. In other words, only the existing
shareholders have a right to buy these shares.
BUY BACK OF SHARES
• The Companies (Amendment) Act, 1999 has
inserted new Sections77A, 77AA and 77B
permitting a company to purchase its own shares
subject to certain conditions.
THANK
YOU

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SHARES AND

• Participating Preference Shares are entitled to a preferential

• The holders of Convertible Preference Shares have a right to get

• The holders of Non-Convertible Preference Shares do not have the

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