types, difference , basis

1. NIT
MBA

2. WHAT IS SHARE?
 A share is a stock of a company. Each share forms a
unit of ownership and is offered for sale when more
capital is required by the company.
 According to Section 2 (46) of the Companies Act,
1956, a share is a share in the share capital of a
company, and includes stock except where a
distinction stock and shares is expressed or implied.
 The person who is the owner of the shares is called
‘Shareholder’ and the return he gets on his investment
is called ‘Dividend’.

3. SHARE CAPITAL
MEANING OF SHARE CAPITAL.
 Denotes the amount of capital raised by the issue
of shares, by a company.
 Collected through issue of shares and remains
with the company with its liquidation.
 The shareholders are the owners of the company.
 Total share capital is divided into small parts, each
part known as share.

4. •EQUITY SHARE (ORDINARY SHARE)
•PREFERANCE SHARE

5. EQUITY SHARE (Ordinary shares)
 The shares that are ordinary in course of the
company’s business.
 Acc to section 85(2),
“equity share” means with reference to any such
company, all share capital which is not a preference
share capital.

7. TYPES OF EQUITY SHARE MEANING
 AUTHORIZED SHARE CAPITAL
 ISSUED SHARE CAPITAL
 SUBSCRIBED SHARE CAPITAL
 The maximum amount of capital
which can be issued by a company. It
can be increased from time to time.
Some fee is required to be paid to
legal bodies accompanied with some
formalities.
 It is that part of authorized capital
which is offered to investors.
 It is that part of Issued capital which
is accepted and agreed by the
investor.

8. TYPES OF EQUITY SHARE MEANING
 PAID UP CAPITAL
 RIGHTS SHARES
 BONUS SHARES
 SWEAT EQUITY SHARE
 Part of the subscribed capital, the
amount of which is paid by the
investor.
 To protect the ownership rights of
existing investors
 Shares given by the company to
its shareholders as a dividend. Has
both advantages and
disadvantages like dividend,
capital gain , high risk, market
fluctuation etc.
 issued to exceptional employees or
directors of the company for their
exceptional job in terms of
providing know-how
or intellectual property rights to
the company.

9. PREFERANCE SHARE
 Preference shares are those shares which carry certain
special or priority rights.
 The percentage of dividend is fixed in preference
shares.
 According to Sec. 85 of the Act, preference shares are
those shares on which there is preference right to
claim dividend during the life time of the company,
and to claim repayment of capital on the winding up.

10. PREFERANCE SHARE
CUMULATIVE
AND NON
CUMULATIVE
PARTICIPATING
AND NON
PARTICIPATING
REEDEMABLE
AND
NON
REEDEMABLE
COVERTIBLE
AND
NON
CONVERTIBLE

11. Types of Preference share Meaning
 Cumulative
 Non cumulative preference
shares
 Redeemable
 all dividends are carried forward
until specified, and paid out
only at the end of the specified
period.
 Dividends are paid out of profits
for every year. There are no
arrears carried over a time
period to be paid at the end of
the term.
 Such preference shares can be
claimed after a fixed period or
after giving due notice.

12. Types of preference share Meaning
 Non redeemable
 Convertible
 Non-convertible
 Such shares cannot be redeemed
during the lifetime of the company,
but can only be obtained at the time
of winding up (liquidation) of assets.
 The shares can be converted into
equity shares after a time period, or
as per the conditions laid down in the
terms.
 Non-convertible preference shares
cannot be, at any time, converted into
equity shares.

13. Types of Preference share Meaning
 Participating
 Non- participating
 Such shares have the right to
participate in any additional
profits, after paying the equity
shareholders. The surplus of profit
is apart from the fixed dividend
paid up for preference shares.
 Non-participating preference
shares do not possess any right to
participate in surplus profits or any
surplus gained at the time of
liquidation of the company.

14. Difference between equity and preference
shares
BASIS EQUITY PREFERENCE
PAYMENT OF
DIVIDEND
The dividend is paid after
the payment of all
liabilities.
Priority in payment of
dividend over equity
shareholders.
RATE OF
DIVIDEND
Fluctuating Fixed
VOTING RIGHTS Equity shares carry voting
rights.
preference shares do not carry
voting rights. However, in
special circumstances, they get
voting rights.
COVERTIBILITY Equity shares can never be
converted.
Preference shares can be
converted into equity shares.

15. REDEMPTION YES NO
ARREARS OF
DIVIDEND
Equity shareholders have
no rights to get arrears of
the dividend for the
previous years.
Preference shareholders
generally get the arrears of
dividend along with the
present year's dividend, if not
paid in the last previous year,
except in the case of non-
cumulative preference shares.
REPAYMENT OF
CAPITAL
In the event of winding up
of the company, equity
shares are repaid at the
end.
In the event of winding up of
the company, preference shares
are repaid before equity shares.

16. Allotment of shares
 Issue of Prospectus- The prospectus is like an invitation to the public
to subscribe to shares of the company. A prospectus contains all the
information of the company, its financial structure, previous year
balance sheets and profit and Loss statements etc.
 Receiving Applications- When the prospectus is issued, prospective
investors can now apply for shares. They must fill out an application
and deposit the requisite application money in the schedule bank
mentioned in the prospectus. The application process can stay open a
maximum of 120 days.
 Allotment of Shares- Once the minimum subscription has been
reached, the shares can be allotted. Generally, there is always
oversubscription of shares, so the allotment is done on pro-rata bases.
Letters of Allotment are sent to those who have been allotted their
shares.

17. Issue of shares
 In primary market (issuing shares)
1. Public issue- issue to public at large
2. Private issue- selected people, privately owned funds
3. Right issue- offer to existing share holders to buy
new shares at concessional rates
4. Bonus issue- access cash, issues share at free of cost
to existing shareholders
5. Sweat equity issue- hard-earned money , to loyal
employees
(*are issued according to type of company)

18.  In secondary market(issued shared)
1. Stock market- can be issued by listed public companies.
2. Transfer- governed by the general law, share is a movable
property(sec 44)

19. Transfer of shares.
 Instrument of transfer (form SH.4)
 Duly stamped, dated and executed
 Be delivered to the company
 By the transferor or transferee
 Within a period of 60 days from the date of
execution
 Along with security certificate or letter of
allotment

20. Transmission of shares
 Where shares pass by transmission of law from one person
to another.
 No consideration is required for transmission of shares.
 Takes place in case of death, insolvency or liquidity
A person who gets transmitted shares has 2 options:
1. To get himself registered as a member or
2. To transfer the shares

21. Basis Transfer of shares Transmission of shares
Nature of act Voluntary and deliberate Involuntary and is the result
of operation of law
Instrument of
transfer
Has to be executed by both
transferor and transferee
Not required, only a proof of
title to the shares of person
Consideration Transferred to another
person for some
consideration
Passes without
consideration
Stamp duty Through an instrument of
transfer , stamp duty is
payable on market value of
shares
No stamp duty

22. Bibliography.
 Websites
https://www.owlgen.com
https://www.toppr.com
https://www.investopedia.com
http://www.mca.gov.in
https://taxguru.in/company-law/procedure-transfer-
shares-companies-act-2013.html
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