- Get link
- X
- Other Apps
Equity Shares and Preference Shares
-----------------------
Equity Shares
_ Equity shares are also known as ordinary shares.
_ Equity shares represent the ownership of a company
_ Legal owners
_ Capital raised by the issue of such shares is known as ownership capital or owner’s funds.
_ Equity shareholders are paid on the basis of earnings of the company and do not get a fixed dividend.
_ Equity shareholders are referred to as ‘residual owners’.
_ They have voting rights.
_ Equity shares represent the ownership of a company
_ Legal owners
_ Capital raised by the issue of such shares is known as ownership capital or owner’s funds.
_ Equity shareholders are paid on the basis of earnings of the company and do not get a fixed dividend.
_ Equity shareholders are referred to as ‘residual owners’.
_ They have voting rights.
Forms of Equity Shares
a) Equity Shares with Detachable Warrants
_ The holder of the warrant is eligible to apply for the specified number of shares on the appointed date at the predetermine price.
_ These warrants are separately registered with the stock exchanges and traded separately.
_ The holder of the warrant is eligible to apply for the specified number of shares on the appointed date at the predetermine price.
_ These warrants are separately registered with the stock exchanges and traded separately.
b) Shares with Differential Voting Rights (SWDWR)
_ Means shares that give the holder differential rights as to voting
_ Means shares that give the holder differential rights as to voting
> Shares that have superior voting rights (Rate of dividend is low )
> Shares that have inferior voting rights (Rate of dividend is higher.)
> Shares that have inferior voting rights (Rate of dividend is higher.)
c) Non-Voting Shares (NVS)
_ Do not carry voting right
_ Eligible for higher dividend
_ Do not carry voting right
_ Eligible for higher dividend
d) SWEAT Equity Shares
_ Issued by a company to its directors or employees at a discount or for consideration, other than cash.
_ Scheme – Employee Stock Option Plan
_ Issued by a company to its directors or employees at a discount or for consideration, other than cash.
_ Scheme – Employee Stock Option Plan
Preference Shares
> The Companies Act (Sec 85) describes Preference Shares as
I. Carry a preferential right to payment of dividend
II. Carry a preferential right for repayment of capital
> Promise the holder a fixed dividend
> Preference shareholders generally do not enjoy any voting rights
> Non-participatory
> Given preference in liquidation next to creditors
> Preference shareholders generally do not enjoy any voting rights
> Non-participatory
> Given preference in liquidation next to creditors
> Preference shares with Warrants
Holders can apply for equity shares at premium
> Fully Convertible Cumulative Preference Shares
This instrument is in two parts A & B.
Part A is convertible into equity shares automatically and compulsorily on the date of allotment without any application by the allottee.
Part B is redeemed at par/ converted into equity after a lock in period at the option of the investor
------------------------------------------
Comments
Post a Comment