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UNDERSTANDING EQUITY SHARES

Courtesy/By: Sumit Sanjay Ekbote | 2020-03-12 17:38

EQUITY SHARES

 

Introduction:                The share capital of the company is undoubtedly the ideal method for the procurement of fixed capital because it has not to be paid back to te shareholders within the lifetime of the company.  The only exception is the redeemable preference shares.  A public limited company can issue only two types of shares namely preference shares and equity shares.

 

Equity Shares:              Equity Shares are also called as Ordinary shares because they have no special rights as to dividend or capital attached to them.  According to Section 85 (2) if The Indian Companies Act, 1956, Equity shares means all shares of share capital, which are not preference shares.  The equity shareholders receive the dividend after the dividend of preference shares is paid.  Equity shares capital is called as risk capital of the company.  The dividend on equity shares increases or decreases with the profits made by the company.  In the words of A.S. Dewing equities and equities alone are to be issued for long term financing when the future earing of a company are irregular and cannot be predicted accurately.  The equity shareholders have full voting rights.  Every equity shareholder shall have a right to vote on every resolution placed before the company.

 

Conclusion:                            Share capital must be divided into shares of a fix amount.  The Companies Act permitted only two kinds of shares to be issued.  i.e. Equity share or Ordinary shares and Preference shares.  Equity share capital is not preference share capital.  There are different kinds of preference shares.  Preference share are given preference as regards dividend, refund of capital, conversion, etc.  It has certain advantages and disadvantages also. Equity shares are also called Ordinary shares because they have no special rights as to divide and no change on the assents of the company.

 

 

Courtesy/By: Sumit Sanjay Ekbote | 2020-03-12 17:38