2. Share:-
A share may be defined as one of the unit into
which 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
3. 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 company
Types 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
4. Equity Shares:-
Equity Capital represent ownership capital. Equity shareholders collectively
own 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 fixed
ESH have residual claim to the income company .
ESH have a right to vote on the every resolution on the company.
5. Debentures
It is a bond issued by a company under its seal, acknowledging a
debt and containing Provision as regards repayment of principal
and interest.
Types of Debentures:-
Redeemable and Irredeemable debentures
Mortgage and Simple Debentures
Convertible and Non convertible debentures
6. 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.
7. Issue of share
To collect the capital from the public, a public company
issues a document called prospectus inviting public
submit applications to take up shares of the company.
The prospectus mentions the number and class of
shares offered and manner in which amount of shares is
payable by the public. Usually, the total amount of
shares is payable in a number of installments.
Application money cannot be less than 5% of the
nominal value of the shares. When the application has
been accepted and the shares have been allotted, the
second installment called allotment becomes payable.
8. 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)]
9. •Application must be deposited in banks and it can’t be
withdrawn till the company secure the
“certificate to commence business” [ Sec.69(4)]
•The company shall not proceed to allot share until the
beginning of the fifth day from the date of the issue of
prospectus. ( Sec. 62)
•Initial offer of securities to be in the demat form.
(Sec. 68 B)
10. Allotment Procedure
•The allotment may be settled by lottery.
•The allotment may be on prorata basis.
•Small applications may be given preferential
treatment.
