Equity & Preference Shares Presented By: Sushil Choudhary Roll No-116

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EQUITY & PREFERENCE SHARES

Presented By : SUSHIL CHOUDHARY Roll no- 116

SHARES
A share is a single unit of ownership in a corporation, mutual fund or other organization. A joint stock company divides its capital into shares, which are offered for sale to raise capital, termed as issuing shares. Thus, a share is an indivisible unit of capital, expressing the proprietary relationship between the company and the shareholder. The denominated value of a share is its face value: the total capital of a company is divided into number of shares.

The liability of shareholders is limited to the extent of the face value of shares.

SHARES

EQUITY SHARES PREFERENCE SHARES

Equity 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.

Types of Equity Shares


Authorized share capital Issued share capital Subscribed share capital Paid up share capital

Benefits
It is a permanent source of capital. No compulsion to pay dividends on equity shares. Equity shares serves as the base for a company, and based on this borrowings can be done. The borrowing capacity can be increased by issuing additional equity shares.

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, 1988, 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 cumulation 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.

Benefits
Preference shareholder gets a priority regarding the payment of dividend. The dividend is fixed. Preference shareholders can vote in a general meeting only on the matters which are directly connected to them. These shares are redeemable. The amount must be repaid within 10 yrs from the date of issue as per Company Law Provision.

Difference between Equity & Preference Shares

THANK YOU

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