1. #1
    Unregistered

    What all type of share a company can issue? What is difference between equity and preference shares?

    I am very new to come into the corporate culture and there are so many basic things which I donít even now and I want it to be updated for me. So can you tell me what does Shares mean? Can you tell what all type of share a company can issue? What is the difference between equity and preference shares?

  2. #2
    abbebo Array
    Join Date
    Aug 2012
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    454

    Re: What all type of share a company can issue? What is difference between equity and preference shares?

    Hi...Just wanted to tell u that when a person buys some portion of a company's capital then he will become a shareholder pertaining to that company's assets...Thus the person will own a certain share of company's profits which he will receive via annual dividends...Here "Capital" refers to wealth owned by a company in the form of property or money ..

    A company can issue Preferential or Equity shares..
    Preferential shares are those which enjoy preferential rights of Dividend and Repayment in case a company wounds up

    while Equity shares are those which will enjoy these rights only after the preferential ones are fulfilled...

    Hoping i have satisfied your query

  3. #3
    Labournet Law Consultancy Array
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    2nd Floor, Patel Complex, Basin Road, Ernakulam, Kerala
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    Re: What all type of share a company can issue? What is difference between equity and preference shares?

    Capital of a legal entity can be divided into number of unit and each unit is known as share.

    TYPES OF SHARES

    Shares are of Two types such as preference share and equity share.

    1. Preference Share

    Preference share are the shares which get preference compared to other shares when the company decides to issue dividend to the share holders. It also gets preference for the repayment of capital when the company go for winding up. The shareholders who have preference share will get a fix rate of dividend. Preference share is again divided into

    a). Cumulative Preference Share:- Sometimes the company will not give dividend to the preference share holders if the company has not got profit in a particular year. If the preference share are cumulative preference share then the shareholder can get the dividend in the subsequent year along with the dividend of the previous years. Only after giving the dividend to the cumulative preference share holders in the subsequent year other shareholder will get the dividend. Hence they will received the dividend every year.

    b). Non-cumulative Preference Shares:- If the company do not give dividend in a particular do to not getting the profit for the present year then in the next year the non-cumulative share holder will not get the dividend of the previous year. But if the company decides to give the dividend in that year then they will get the same. That is if the dividend is not paid then it will not be forwarded to the next year. Non cumulative preference share holder will get the same preference like that of the cumulative preference share holder if the company decides to give the dividend.

    c). Redeemable Preference Shares:- It is a preference share which is redeemable in nature. The company has the right to issue redeemable preference share when ever they want which has to be redeemable or paid within 10 years from the date of issue of the same.

    d). Participating Preference Shares :- It is another important preference share. It is participating in nature.


    2. Equity Share

    Equity share is the shareholder who get the dividend only after company giving the dividend to the preference shareholders. For them there is no fixed rate of dividend and the dividend will be floating in nature. The dividend will be decided by the board of directors. If the profit is very high then the equity share holders can get more dividend than the preference share holders. But if the company is not having any profit then the equity share holders will not even get any dividend.
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