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INTRODUCTION
•Companies (Private and Public) need capital either to increase their productivity or
to increase their market reach or to diversify or to purchase latest modern
equipments.
•Companies go in for IPO and if they have already gone for IPO then they go for
FPO.
•The only thing they do in either IPO or FPO is to sell the shares or debentures to
investors.
•(the term investor here represents retail investors, financial institutions,
government, high net worth individuals, banks etc).
•Whether they issue shares or debentures totally depends upon the concerned
company.
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•A share is one unit into which the total share capital is divided. Share
capital of the company can be explained as a fund or sum with which
a company is formed to carry on the business and which is raised by
the issue of shares.
•Shares are the marketable instruments issued by the companies in
order to raise the required capital.
•These are very popular investments which are traded every day in the
stock market and the value of the share at the end of the day decides
the value of the firm.
MEANING OF SHARES
& SHARE CAPITAL
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•Equity Shares are issued and are traded everyday in the stock market.
•Equity share holders only get dividend after preference shareholders &
debenture holders.
•The returns on the equity shares are not at all fixed. It depends on the
amount of profits made by the company.
•The board of directors decides on how much of the dividends will be
given to equity share holders. Share holders can accept to it or reject the
offer during the annual general meeting.
•Equity shareholders have the right to vote on any resolution placed
before the company.
EQUITY SHARES
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The Equity share is a common name, some
of the types of equity shares are:
• Blue Chip Shares
• Income Shares
• Growth shares
• Cyclical Shares
• Defensive shares
• Speculative shares
TYPES OF EQUITY SHARES
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ADVANTAGES
• High Return
• Easily Transferable.
• These can be easily liquidated.
• Right to vote
• Right to choose the board of directors.
• Equity share holders have the right to oppose any of the decisions taken
by the board of directors.
DISADVANTAGES
• High Risk
• In worst cases less privilege given to equity share holders.
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These are other type of shares. The preference shares are
market instrument issued by the companies to raise the capital.
Preference shares have the characteristics of both equity shares
and debentures. Fixed rate of dividends are paid to the
preference share holder as in case of debentures, irrespective
of the profits earned company is liable to pay interest to
preference share holders.
PREFRENCE SHARE
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ADVANTAGES
• These yield fixed rate of returns
• It’s a hybrid instrument having some of the characteristics of
debentures and equity shares.
DISADVANTAGES
• They do not provide the investor with any of the voting
rights.
• If the company gets huge profits then they won’t get any
extra bonus.
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ISSUE OF SHARES
Prospectus
Application
Repayment
/ dividend
Allotment
Detail of a Company & Shares in Prospectus.
90 % application is necessary
If access application received then company issue
shares by pro rata basis
full amount can be called up by company at the
time of application or it can be paid up in
installments also (calls)
share of the company may be issued in any of the
following three ways:
1. At par;
2. At premium; and
3. At discount.
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Issue of shares for consideration other than cash
(For example: issue of shares to vendors, to promoters etc.)
Forfeiture of shares
Buy – Back of Shares
Right Shares
Redemption of preference shares/ Debenture
CONT….
13. Instrument of debt executed by the company
A certificate of loan
Company pays pre specified percentage of
interest
Part of the company's capital structure
Debentures are generally secured against the
company’s assets
Convertible debentures can be either fully or
partly converted into Shares
Convertible debentures may carry a lower rate of
interest
13
DEBENTURES
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Security Point of View
i. Secured Debentures
ii. Unsecured Debentures
Tenure Point of View
i. Redeemable Debentures
ii. Perpetual Debentures
Mode of Redemption Point of View
i. Convertible Debentures
ii. Non-Convertible Debentures
Coupon Rate Point of View
TYPES OF DEBENTURES
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ADVANTAGES
1. Control of company is not surrendered to debenture holders because
they do not have any voting rights.
2. Interest on debenture is an allowable expenditure under income tax
act, hence incidence of tax on the company is decreased.
3. Debenture can be redeemed when company has surplus funds.
DISADVANTAGES
1. Cost of raising capital through debentures is high of high stamps duty.
2. Common people cannot buy debenture as they are of high
denominations.
3. They are not meant for companies earning greater than the rate of
interest which they are paying on the debentures.
17. A meeting is a gathering of two or more people that has been
convened for the purpose of achieving a common goal
through verbal interaction, such as sharing information or
reaching agreement. Meetings may occur face to face or
virtually, as mediated by communications technology, such
as a telephone conference call or a videoconference.
18. Meeting is a process to come
together with a specific purpose
at a particular time……
20. Every company limited by share or
guarantee and having a share
capital has to commence
That’s the first meeting of the
shareholder’s of the company
Only once in a lifetime
21. Board of directors to forward it at least
21 days before meeting.
Every member to receive the copy.
Notice of meeting to clearly say the word
“statutory meeting”.
If the report is forwarded later than 21
days every member entitled to attend the
meeting has to agree on the due
forwarding process.
22. Organize it within every 15 months with
the exception of first meeting to be held
in 18 months of the making.
The meeting must be held in each year.
It must not held later than 6 months from
the date of balance sheet.
Notify in writing 21 days prior to
meeting.
23. Consideration of accounts, balance sheet
and reports of the board of directors and
auditors
Shareholders can take decisions relating
to business
Declaration of dividends
Appointment of directors
Appointment and fixed or remuneration
of auditors.
24. Statutory and annual meetings are
ordinary
This meeting is called to decide upon a
serious issue that cannot be delayed of
the next annual meeting
Board of directors on their own or on
the request of members can call meeting
and by the company law board.
25. Resolutions mean decisions taken at a
meeting. A motion, with or without
amendments is put to vote at a meeting.
Once the motion is passed, it becomes a
resolution. A valid resolution can be
passed at a properly convened meeting
with the required quorum.
28. It is only on special matters and requires
majority of 3/4th to pass it
The notice has to be duly given in the general
meeting
A copy of every special resolution has to be
filled with registrar along with the
explanatory statement within 30 days of
passing resolution.
29. Alteration of memorandum {SEC 17 (1) & (2)}
Change the name of the company {SEC 21}
Payment of interests on capital {SEC 208 (2) & (3)}
Voluntarily winding up of company {SEC 550 (1)
(b)}
Alteration of articles of company {SEC 31 (1)}
Omission or addition of “private” word from name
of company {SEC 21 }
30. It is a different kind of ordinary resolution of
which a notice of intention to move a
resolution has to be given to the company by
the proposer
Notice has to be given within 14 days of
proposed date of meeting
Company should give notice to the members
by advertising in newspapers/feeds.
31. Appointment of the auditor other than
retiring ones {SEC 225}
Provision that a retiring auditor will not
be reappointed {SEC 225}
Removal of a director before the expiry
of his/her period {SEC 284}
Appointment of director in the place of
one who is removed {SEC 284}
Initial public offering (IPO)
Follow On Public Offer.
A mix of a company's long-term debt, specific short-term debt, common equity and preferred equity. The capital structure is how a firm finances its overall operations and growth by using different sources of funds.