PPT ON ISSUE OF SHARES

2. TOPIC ISSUE OF SHARES AND
ALLOTMENT OF SHARES
Presented by : prof. Santosh Byadagi
Dept of commerce

3. There are three main types of business organisations :
1) sole proprietorship, 2) Partnership firm, 3)Joint stock
companies. Each form of business organisation is
required capital to carry on its business smoothly. In
case of sole proprietorship capital contributed by sole
proprietor , in case of partnership firm capital
contributed by partners and in case of company capital
is invested by the public. Two main limitation of sole
proprietorship and partnership are: 1) inadequacy of
funds, 2) unlimited liability . In order to avoid these
limitations one of the most convenient form of
organisation that grew with expansion of business
requiring huge funds is the joint stock company form
of organisation. In India, joint stock companies are
governed by provision of the companies Act 1956

4. The amount collected by the company from the
public towards it’s capital, collectively is
known as share capital
A share is one unit into which the total share
capital is divided.
In other word, A share is an unit of the share
capital with definite value.
The persons who hold these shares are known as
the share holders of the company .

5. The share capital of the company is divided
into five divisions as shown below:
 Authorised capital : This is the maximum
capital which the company can raise in its life
time. This is mentioned in the memorandum of
the association of the company. It is also called
as registered capital or Nominal Capital.
 Issued Capital: The part of the authorised
capital which is issued to the public for
subscription is called as issued capital.

6.  Subscribed capital: The part of the issued capital for
which application are received from the public is called
as subscribed capital.
 Called up Capital : The part of subscribed capital which
the company has actually called upon the shareholders to
pay cash is called as called up capital.
It includes the amount paid by the shareholders from
time to time on application, allotment and various calls
etc. The remaining part of subscribed capital not yet
called up is known as Uncalled capital.
 Paid up Capital: The part of called up capital which is
actually paid by the shareholders is known as paid up
capital. The remaining part indicates the default in
payment of calls by some shareholders is known as calls-
in- arrears.

7. According to section 2(46)of the companies Act 1956
share is defined as “A share is the share in the
capital of the company”
Types of Shares:
According to section 85 of the companies Act 1956,
the share capital of a company consists of two
types of shares, namely
1) Equity shares 2)preference shares.
I. Equity shares:
According to section 85 (2) of the companies Act
1956, Equity shares can be defined as the shares
which is not preference shares.

8. In other words Equity shares are those shares,
which do not have the the following preference rights:
a) preference dividend over others,
b) preference for repayment of capital over others at
the time of winding up of the company.
Equity shares are also called as ordinary shares which
are the most common type of shares and the full name
is fully paid ordinary shares or fixed price offer (FPO)
Types of Equity Shares :
1. Equity shares with voting rights: The shares which are
issued by the company without specifying the rate of
dividend are called as equity shares with voting rights .
2. Equity shares with differential rights : The holders of
these shares have differential rights as to dividend,
voting or other wise in accordance with such rules and
subject to conditions as may be prescribed.

9. II. Preference shares :
According to Section 85(1) of the companies Act 1996,
A preference share is one, which carries the following two
preferential rights;
i. The payment of dividend at fixed rate before paying dividend to
equity shareholders.
ii. The return of capital at the time of winding up of the company,
before the payment to the equity shareholders.
Preference shareholders do not have any voting rights in the
general meeting of the company.
Types of Preference Shares :
1) Cumulative and Non- cumulative preference shares :
cumulative preference share are those shares on which the
amount of dividend if not paid in any year, due to loss or
inadequate profits, then such unpaid dividend will accumulated
and will be paid in the subsequent years before any dividend is
paid to the equity shareholders. On the other hand if unpaid
dividend is not accumulate and paid in the subsequent years such
share are known as “Non-cumulative preference shares”

10. 2)Participating and Non-participating preference shares:
participating preference share are those shares, which
in addition to the basic preferential rights , also carry a
rights to receive additional dividend over and above the
fixed rate, out of the surplus left, after making payment of
dividend on the equity shares at certain rate. Besides these
shares are also have a rights to receive surplus assets , which
remains after the entire capital has been paid on winding up
of the company. Such rights are given only when there is a
provision in the articles of association to that effect. On the
other hand, if there is no such rights to participation, they
are known as “Non- participating preference shares”
3) Redeemable and Irredeemable preference shares:
redeemable preference shares are those shares which are
to be redeemed (repaid) after specified period if desired by
the holders of such shares. On the other hand, the
preference shares which cannot be redeemed (repaid)
during the life time of the company are known as
“Irredeemable preference shares”