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Notes SHARES
Notes SHARES
CLASSIFICATION OF SHARES
According to Companies Act, 2013, shares are classified into two types
1. Preference Shares
2. Equity Shares
PREFERENCE SHARES
Preference Share Capital is the sum total of the preference shares. These shares carry the
following preferential rights over equity shares-
Note: - Since preference shares carry a preference over equity shares, a company
cannot have only preference share capital. However, a company can have only
equity share capital. It is not compulsory to have preference share capital.
If dividend is skipped for a year, the dividend for that year is accumulated and in second
year dividend for both the years is to be paid
These shares have a right to a share in the surplus profits of the company besides fixed
dividends.
Convertible preference shares are shares which may be converted into equity shares.
EQUITY SHARES
Equity shares have been defined as any shares other than preference shares.
A company can issue equity shares with differential voting rights (DVR) upto 25%
of total voting power
Normally 1 equity share carries 1 vote but in case of equity shares with DVRs the
shareholders may be given 1 vote for 10 shares or 10 votes for 1 share
A limited company having a share capital may if so authorized by its articles increase its
share capital by issuing new shares.
The shareholders also have a right to renounce the right of preemption in favour of any
other person. This is called Right of renunciation.
Exception- This Section is not applicable to