Shares

SHARES
According to Justin Farwell, share is the interest of a shareholder in the company measured by a sum
of money for the purpose of liability in the first place and of interest in the second but also
consisting of mutual covenants entered into by all shareholders in terms of Act and Articles.
Types of share Capital
1 Authorised Capital: This is the amount stated in the capital close of the memorandum of
association with which the company registered. On registration, an advalorem duty is paid on the
amount of authorised capital. Since company is registered with a given amount of share capital, on
incorporation, It becomes entitled to issue shares of that much amount number. Hence, it is also
referred to us authorised capital. It is not necessary for a company to issue the entire amount of
capital mentioned in the memorandum at one and the same time.
2 Issued capital: The part of authorised capital which is offered to the public for subscription
including shares offer to defenders for subscription other than cash is called issued capital. The part
of authorised capital not offered for subscription to public is known as on issued capital which can be
offered to the public at a later date.
3 Subscribed capital: It is that part of issued capital which represent the fees or nominal value of
shares subscribed for by person, i.e., applied for by prospective shareholders and alerted by the
company. The balance of issued capital not subscribed for by the public is called on subscribed
capital.
4 Called-up capital: the portion of subscribed capital that the directors require the shareholders to
pay on shares allotted to them is known as called up capital. The directors may decide to call the
entire amount or part of the amount of face value of shell as the need may be. It is not necessary for
the directors to call for the entire amount on shares subscribed by the shareholders. The balance of
subscribed capital which has not been called up denotes uncalled capital quotation.
5 Paid up capital: the amount of called up capital which has been actually paid by the shareholders
is called paid up capital. The difference between called up capital and paid up capital arises due to
the reason that some shareholders may fail to pay the amount called up by the company on the
shares held by them. The balance of cold up amount on shares which has not been received by the
company is termed as calls in arrears.
6 Reserved capital: a company may decide by special resolution that certain portion of its uncalled
capital shall not be available for being called up except in the event and for the purpose of
liquidation. such a portion is called reserved capital.
PREFERENCE SHARES
According to section 85 of the Companies Act, 1956, A preferential is 1. Which fulfils the following
conditions:
a. That it carries a preferential right to dividend to be paid either as a fixed amount or an amount
calculated by fixed rate which may be either free of or subject to income tax; and
b. That with respect to capital it carries or will carry, on the winding up of the company, The right
To the repayment of capital before anything is paid to equity shareholders. However,
notwithstanding the above two conditions, a holder of the preferential may have a right to
share fully or to a limited extent in this applauses of the company as specified in the
memorandum or Articles of the company.
Types of Preference Shares:
i Cumulative Preference Shares:
A cumulative preference share is one that carries the right to a fixed amount of dividend or dividend
at a fixed rate. Such a dividend is payable Even out of future profit, if current years profit are
insufficient for the purpose. This means that dividend on these shares accumulates on less It is paid
in full and therefor the shares are called cumulative preference shares. The areas of dividend are
then shown in the balance sheet as a contingent liability.
ii Non-cumulative preference share:
In non cumulative preferential carries with it the right to a fixed amount of dividend. In Case No
dividend is declared in a year due to any reason, the right to receive such a dividend for that year
expires. In case the dividend remains in areas for a period of not less than two years or an aggregate
period of not less than three years comprised in the six years and then with the expiry of financial
year. Holders of such shares will be entitled to take part and vote on every resolution at any meeting
of the shareholders.
iii Participating preference shares:
Notwithstanding the right to a fixed dividend, this category of preferential conference. On the
holder, the right to participate in this a plus profit, if any, after the equity shareholders have been
paid dividend at a stipulated rate. Similarly, In the event of winding up of the company, this type of
share carries the right to receive a predetermined proportion of suppliers as well once the equity
shareholders have been paid off.
iv Non-participating Preference :
Is share on which only a fixed rate of dividend is paid every year without any accompanying
additional right in profits, and in this applause on winding up is called non participating preference
share. Unless otherwise specified, the preference shares are generally nonparticipating.
v Redeemable preference share:
These are shares that a company may issue on the condition that the company will repay after the
fixed or even earlier at companies discretion. The repayment of on these shares is called redemption
and is governed by section 80 of the Companies Act, 1956.
vi Non-redeemable preference share:
The preferential which do not carry with them the arrangement regarding redemption. Are called
Nonredeemable preference shares. According to section 80 (5A), No company limited by shares
shall issue irredeemable Preference share Preferential redeemable after the expiry of 20 years from
the date of issue.
vii Convertible preference shares:
These shares give the right to the holder to get them converted into equity shares at their option
according to the terms and conditions of their issue.
viii Non-convertible preference Shares: When the holder of a preference share has not been
conferred the right to get his holding converted into equity share, it is called non convertible
preference shares. Preference shares are Nonconvertible unless otherwise stated.

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SHARES

Types of share Capital

i Cumulative Preference Shares:

ii Non-cumulative preference share:

iii Participating preference shares:

v Redeemable preference share:

vi Non-redeemable preference share:

vii Convertible preference shares:

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