• A share is the share capital of the company including stock according to section 2(84) of the Companies Act 2013.
  • A share is a measure of the interest in the company’s assets held by a shareholder.

Kinds of share capital [S. 43]

Capital must be divided into shares of a fixed amount. All the shares may be of only one class or may be divided into two different classes of securities. For this purpose, securities means securities defined in Section 2{h), Securities Contracts (Regulation)Act, 1956 [S. 2(81)] and includes “hybrids”. The Act permitted only two kinds of shares to be issued, namely:”

  1. Equity share capital, that is, ordinary shares, and
  2. Preference shares, which constitute the preference share capital.

Ordinary share capital or “equity share capital is defined in the Act as meaning all share capital which is not preference share capital. The share capital of a company limited by shares shall be of two kinds only, namely:

  1. equity share capital
  2. with voting rights; or
  3. with differential rights as to dividend, voting as otherwise in accordance with such rules and subject to such conditions as may be prescribed;

Preference share capital. [S. 43]




Preference shares capital means that part of the share capital of a company fulfills both the requirements:

During the continuance of the company, it must be assumed of a preferential dividend. The preferential dividend may consist of a fixed amount payable to preference shareholders before anything is paid to the ordinary shareholders or the amount payable as a preferential dividend may be calculated at a fixed rate, for example, 5% of the nominal value of each share.

 On the winding up of the company it must carry a preferential right to be paid, that is the amount paid up preference shares must be paid back before anything is paid to the ordinary shareholders. The preference unless there is an agreement to the contrary exists only up to the amount paid up or deemed to have been paid up on the shares.


Equity Share Capital with reference to any company limited by share means all share capital that is not preference share capital is Equity Share Capital. It refers to the portion of the company’s money which is raised in exchange for a share of ownership in the company. Equity shares are the main source or the foundation of the company in raising funds for the firm. All equity shareholders are collective owners of the company and they have the authority to control the affairs of the business. Ownership in the company is depending on the % of shares they hold. These shares are also called Ordinary shares. Equity shares have no right to receive dividends. The dividend on equity shares is not fixed and may differ every year depending on the profits available.


  • With Voting Rights.
  • With Differential rights to voting, dividend, etc. in accordance with the rules.


In 2008, ABC Motors introduced equity shares with differential voting rights- the ‘X’ equity shares. According to the situation:

  • Every 10 ‘X’ Equity shares have one Voting rights.
  • ‘X’ Equity shares get 5 percentage points more dividend than the ordinary shares.

Due to the difference in the voting rights, the ‘X’ Equity shares are traded at a discount to ordinary shares with voting rights.

It also extends to the benefit of shareholders:

  1. FAIR LIQUIDITY: Shares prices are directly proportional to fluctuations in the market or to the company’s revenue generation.
  2. PROFITABILITY: investors do not just benefit from the capital appreciation features of equity shares but also earn regular dividends on their investments.
  3. CONTROL OF MANAGEMENT: shareholders with a significant percentage of the shareholding can influence a company’s management.


In the case of LIC OF INDIA V, ESCORTS LTD. 1986

  1. Right to elect directors of the company and through them participate in the management of the company.
  2. Right to vote on resolutions at meetings of the company.
  3. Enjoy benefits earned by the company in the shape of dividends.
  4. Right to apply to court and get relief in the case of oppression and mismanagement.
  5. Right to move the court for winding up.
  6. Right to share surplus on winding up of the company.

The case was decided correctly with certain parts that were not that essentially taken into consideration. The fact that court’s decision was made based on the statute, so the interpretation was appropriate.


  • The company tends to invite the public to acquire shares.
  • Equity share capital thus raised through equity shares issues is used for developing the business venture of the company.
  • Large capital help to maintain a good reputation in the market.
  • When a company issue shares for investors to acquire, they also extend an opportunity to earn a share of its profit and also to stake in its equity.


Several types of equity shares help the company to generate Equity Share Capital.

  1. AUTHORISED SHARE CAPITAL: The maximum amount of share capital that can be issued by a particular company is known as authorized share capital. Companies can increase their permissible limit to authorize shares after they have availed permission from the respective authority and have paid the required fees.
  2. ISSUED SHARE CAPITAL: share that a company offers to its investors.
  3. SUBSCRIBED SHARE CAPITAL: it comprises the part of issued share capital that the investors agree upon and accept.
  4. RIGHT SHARES: the shares that are issued to the individuals after they have invested in equity shares are known as right shares. They are issued to safeguard existing investors’ ownership.
  5. SWEAT EQUITY SHARES: According to Section 54 of the Companies Act 2013, a company can issue sweat equity shares. These shares are generally issued at a discount. Such shares might also be issued for consideration other than cash for rendering and for making some Intellectual property rights available for the company. As an appreciation for well-done work so then the companies reward their employees or directors with shares.
  6. PAID-UP CAPITAL: it forms the part of subscribed capital that the company invests in their business.
  7. BONUS SHARES: These shares are issued to investors in the form of dividends.


Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.


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