— Kishore V, SME and ACW at Edumarz
- A company’s capital is split into several equal pieces.
- Each component is referred to as a share.
- A company’s capital can be divided into shares of Rs.10, Rs.50, Rs.100, or any other reasonable quantity, although lower denomination shares are always preferred because they are more accessible to small investors.
- “The percentage of capital to which each member is entitled to his share,” according to Lord Lindley.
- In this approach, a share is a proportionate element of a company’s share capital and constitutes ownership.
- There are two sorts of shares, according to the Companies Act of 2013, one is common stock and the other is preferred stock.
1.I) Preference Share:
- A preference share is one that has the two rights listed below:
(a) They are entitled to a fixed-rate dividend before any dividend on equity shares is paid.
(b) In the event of the company’s dissolution, they are entitled to a return of capital prior to the return of capital on equity shares.
Regardless of the above two criteria, a holder of a preference share may have a right to partake in the company’s excess in full or in part, as stipulated in the company’s Memorandum or Articles .
(ii) Equity Share:
- “An equity share is a share that is not a preference share,” according to the Companies Act of 2013.
- As a result, this share has no preferential rights, whereas an equity share is one that is entitled to dividends and capital return when the claim of preference shares is met.
- Typically, equity owners control the company’s activities and so have the right to all earnings after preference dividends have been paid.