Shares and Debentures
A detailed explanation of shares, including their types such as equity shares and preference shares, along with features like permanent capital, voting rights, and sweat equity shares. Learn about the conditions for issuing sweat equity shares and the legal framework surrounding shares in a company.
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Presentation Transcript
Unit 3: Shares and Debentures
SHARES: Meaning: A company s capital is divided into small equal units of a finite number. Each unit is known as SHARES It is percentage of ownership in a company. Investors who hold shares of any company are known as shareholder. Definition: Section 2(84) of the Companies Act, 2013 A share in the share capital of the company and includes stock. It represents the interest of a shareholder in the company, measured for the purpose of liability and dividend
Features of Shares. Permanent Capital. No obligation to pay dividend. No security. No obligation to refund capital. Residual claims to income and property. Freedom to transfer shares. Right to manage the company Limited liability.
Kinds or Types of Shares. 1.Equity shares (including sweet equity shares) 2.Preference shares.
Equity shares: These are shares which do not enjoy any preferential right either in respect of payment of dividend or in respect of the repayment of capital at the time of the winding up of the company. This is ordinary ownership share, person who holds equity share will get the ownership of the company
Feature of equity shares: No preferential payment. Rate of dividend is not fixed. Repayment of capital is done only availability of fund at the end. Risk capital. Can enjoy high rate of dividend Voting rights. Preference rights in respect of further issue. Major portion of share capital.
Sweat equity shares. Sweat equity shares are shares issued by a company to its employees or directors at a discount to market price. It is not independent shares, it is just provision to equity shares.
Conditions for the issue of Sweat equity shares The sweat equity shares must be a class already issued. At least one year must have elapsed since the company became entitled to commence business. The issue must have been authorised by a special resolution of the general meeting . The issue must be made in accordance with SEBI guidelines.
