Share:-A share may be defined as one of the unit intowhich share capital of a company can be divided.The following kinds of shares may be issued by a company: 1. Preference Shares 2. Equity shares
Preference Shares:- are those which carry the following Preferential Rights over the other class of shares:- A preferential right in respect of fixed dividend Right as to repayment of capital in case of winding up of companyTypes of Preference Shares:- Cumulative and Non cumulative:- In case of CPS, their Dividend goes on accumulating unless paid and in Non cumulative shares, right to claim dividend lapses. Participating and non participating :- In PPS get a share out of surplus (Profit after paying equity share dividend) and in NPPS vise-versa. Convertible and Non convertible:- CPS can be converted in equity shares but NCPS can not be converted in to equity shares. Redeemable and Non Redeemable
Equity Shares:-Equity Capital represent ownership capital. Equity shareholders collectivelyown the company. They bear the risk and enjoy the reward of the ownership.Features of ES ES do not carry preferential right . Rate of dividend on the ES is not fixedESH have residual claim to the income company . ESH have a right to vote on the every resolution on the company.
DebenturesIt is a bond issued by a company under its seal, acknowledging adebt and containing Provision as regards repayment of principaland interest.Types of Debentures:- Redeemable and Irredeemable debentures Mortgage and Simple DebenturesConvertible and Non convertible debentures
Share Capital •Authorized capital :- it is the nominal value of share which company is authorized to issue by its MOA . •Issued capital:- It is the nominal value of the shares which are offered to the public for subscription. It can not be more than authorized capital. •Subscribed capital:- It is the nominal value of the shares taken up by the public for subscription.
Issue of shareTo collect the capital from the public, a public companyissues a document called prospectus inviting publicsubmit applications to take up shares of the company.The prospectus mentions the number and class ofshares offered and manner in which amount of shares ispayable by the public. Usually, the total amount ofshares is payable in a number of installments.Application money cannot be less than 5% of thenominal value of the shares. When the application hasbeen accepted and the shares have been allotted, thesecond installment called allotment becomes payable.
Allotment of Shares‘Allotment’ is an acceptance to an offer for purchase of shares.Where allotment does not conform to the statutory requirements, it is called irregular allotment. For allotment to be valid, following requirements must be satisfied: •The company must receive at least 5% cash, of the nominal value of share, as application money. [ Sec. 69(3)] •A copy of prospectus must be duly filled with the registrar for registration. (Sec. 60) •The minimum subscription amount as disclosed in the prospectus must be received within 120 days of the issue of the prospectus.[ Sec.69(1)]
•Application must be deposited in banks and it can’t bewithdrawn till the company secure the “certificate to commence business” [ Sec.69(4)]•The company shall not proceed to allot share until thebeginning of the fifth day from the date of the issue ofprospectus. ( Sec. 62)•Initial offer of securities to be in the demat form.(Sec. 68 B)
Allotment Procedure •The allotment may be settled by lottery. •The allotment may be on prorata basis. •Small applications may be given preferential treatment.