Discuss different kind of shares. (2017)
Category : Company Law
An authorized capital of a company is divided into small parts. Every part is called share. A person who purchases the share is called shareholder. Public limited company offers the shares to public through its prospectus. The powers and rights of the share holders are also laid down in the prospectus or in the articles.
1. ORDINARY SHARES :-
After the payment of fixed dividend to preference shareholders these participate in the remaining profit. Their profit is not fixed. They have no special rights in regard to profit.
2. DEFERRED SHARE :-
Generally these are issued to promoters of a company. The dividend on deferred share is paid after the payment of profit to all other kinds of shares.
3. PREFERRED SHARES :-
These shares are preferred on other shares. A fixed profit is paid first on these shares. These shareholders have some preferential rights on other shareholders. Following are important kinds of preference shares :
Cumulative preference share :- If in any year profits of the company are not enough to pay the dividend of cumulative preference shares, it continues accumulating until it is finally paid by the company.
Non cumulative preference shares :- If such shares profit is not paid in any year due to loss then it is never paid.
Guaranteed preference shares :-These are those shares which another company takes guarantee of payment of a fixed profit and repayment of capital.
Redeemable preferences shares :- Such shares are fully paid up before redemption. The repayment of these shares made by issuing fresh shares or by creating Reserve Fund. These are payable after a certain period.
Participating preference shares :- These shareholders are entitled to receive profit at a fixed rate and they also participate in the further surplus profit.