SHARES - MEANING
Share means share in the share capital of a company. The total is capital of the company is dividend into Small units. Each unit called a share. Each share in a company shall be distinguished by its appropriate number. A share is the interest of a shareholder in a company. Share is a movable property and transferable in the manner provided by the Articles of Association. A share is not a negotiable instrument. Share is also regarded as goods. Section 2(7) of the Sale of Goods Act, 1930 defines "goods" to mean any kind of movable property other than actionable claims and money and includes stock and shares. Though shares recognised as movable property, it shall be transferable only in the manner provided by the Articles of Association.
SHARE - DEFINITION
According to Section 2(84) of the Companies Act, 2013 Share means share in the "Share Capital of a company and includes Stock except where a distinction between stock and shares is expressed or implied"
KINDS OF SHARE CAPITAL
Section 43 of the Companies Act 2013 provides that a company limited by shares can issue two classes of shares namely:
(i) Equity Share Capital:
(i) With voting rights (or)
(ii) With differential rights as to dividend, voting or otherwise in accordance with Such rules as may be prescribed.
(i)Preference Share Capital
EQUITY SHARES - MEANING
Equity Shares are those shares which do not have any preferential right as regards dividend and repayment of share capital. Equity Shares are also known as Ordinary Shares. In other words, equity shares are those shares which are not preference shares. The amount of dividend payable on equity shares differs depending upon the profits earned by the company. The Rate of dividend will be recommended by the Board of Directors and declared by the shareholders in the general meeting.
Shares With Differential Voting Rights
Section 43 of the Companies Act 2013 enables companies to issue 2 variety of equity shares with differential rights etc. Rule 4 of Companies (Share Capital and Debentures) Rules, 2014 states the 1ollowing conditions for issuing shares with differential voting rights.
Conditions for Issuing Shares with Differential Rights
NO Company limited by shares shall issue equity shares with differential rights as to dividend, voting or otherwise, unless it complies with the following conditions, namely:-
(a) The articles of association of the company must authorize the issue of shares with differential rights
(b) The issue of shares is to be authorized by an ordinary resolution passed at a general meeting of the shareholders. In case, the equity shares of the company are listed on a recognized stock exchange, the issue of such shares shall be approved by the shareholders through postal ballot.
(c) The shares with differential rights shall not exceed twenty six percent of the total post-issue paid up equity share capital including equity shares with differential rights issued at any point of time.
(d) The company shall have a consistent track record of distributable profits for the last three years;
(e) The company has not defaulted in filing financial statement and annual returns for three financial year immediately preceding the financial year in which it is decided to issue such shares
PREFERENCE SHARES MEANING
Preference shares are those shares which have preferential right in getting fixed rate of dividend as well as repayment of capital on winding up. Preference shares must fulfill both the following requirements:
A preferential right in getting fixed rate of dividend and
A preferential right in the repayment of capital on winding up.
TYPES OF PREFERENCE SHARES
Preference shares can be classified into:
Participating Preference Shares.
Non-Participating Preference Shares.
Cumulative Preference Shares.
Non-Cumulative Preference Shares.
Redeemable Preference Shares.
Irredeemable Preference Shares.
Convertible Preference Shares.
Non-Convertible Preference Shares.
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