company act 2013 shares and its type

1. Share
&
its types

2. Share
Definition: Acc to sec 2(4) of the company act 2013
‘share’ means in the share capital of a company,
and include stock except where a distinction
between stock or share is expressed or implied .

3. Meaning of share:-
Every part of a joint capital of a company is a ‘share’.
By acquiring the share of a company, any individual
can become the company’s shareholder. The right
and liability of a shareholder originate because of
the share that are held by a person in a company.

4. Characteristic of share
Movable property
Number
Share certificate
Registration of share
Right and interest

5. Types
of
shares
Equity
shares
Preference
shares
Cumulative and
non-cumulative
participating and
non-participating
Redeemable and
non-redeemable
Convertible and
non-convertible

6. Equity share
Acc. To sec 43 of the company act, 2013 all share of a
company which are not preference shares are equity
share or ordinary share. Equity share constitute the major
portion of the share of a company having share capital.
The dividend on equity share, and the return of capital in
case of winding up of the company, is paid on equity
shares after it has been paid on preference share.

7. Preference share are those share which have the
following rights:
They have a right to receive dividend at a fixed
rate before any dividend paid to equity
shareholder
When the company is wound up, they have a
right to the return of capital before that of
equity share holder

8.  Cumulative preference share : they have a
right to get a fixed amount of dividend at a fixed
rate. If the current year profit is not sufficient to
the dividend on these share then the accumulated
arrear of dividend is paid to them if any dividend
is declared in the subsequent year.
 Non-cumulative preference share : carry
the right to get fixed amount of dividend at fixed
rate before any dividend is paid on other types of
shares. But these share do not carry the right to
receive any arrear of the dividend in a particular
year in the company has not declared any
dividend in the previous year or years .

9.  Convertible preference share: The holder of
these share have a right, if he so desire to convert
his share, within a specified period or by a
specified date, into equity shares.
 Non convertible preference share : The holder of
these share does not have the right to covert his
share into equity shares.
 Redeemable preference share : Share on which
the capital can be paid back to the holders after a
specific time during the life time of the company
are called redeemable shares

10. Irredeemable preference share : preference share
of a company which cannot be redeemed are called
irredeemable preference shares.
Participating preference share : These share have
right to receive the dividend at the specified rate,
also carry the right to participate in receiving a
share in the other profits of the company.
Non participating preference share : These
share have right to receive the dividend at a fixed
rate, but do not carry the right to participate in
receiving any share in the company’s other profit.

11. Distinction between
equity and preference share
 Right of dividend
 Return of capital
 Rate of dividend
 Redemption
 Voting right
 Necessity
 Types
 Face value

12. Deferred share :-
“Deferred share are also called “founder” or
“promoters”, which are allotted to the
promoters of the company in
consideration of their services rendered by
them in bringing about the company.”

13. Stock
“By stock is meant the total amount of the
fully paid up value of shares which can
later be divided into small units so that
any amount of the share value can be
transferred to others.”

14.  A company cannot invite the public to buy its
stock.
 Only fully paid shares of a company can be
converted into stock.
 The companies articles must have a provision
to convert shares into stock.
 The stock has no definite number.
 The stock-holder of a company is paid a
dividend by the company.
 The stock of company, like its shares, is a part
of the company’s capital.

15. Conversion of Shares Into Stock
When a company has received the fully paid value of its
shares, it can convert the amount received into its ‘stock’. The
statutory provisions of converting shares into stock are as
follows:
(1) A company may by ordinary resolution- (a) convert any
paid-up shares into stock; and (b) reconvert any stock into
paid -up shares of any denomination.
(2) The holders of stock may transfer the same, or any part
thereof, in the same manner as, and subject to the same
regulations under which, the shares for which the stock
arose before the conversion have been transferred.

16. (3) The holders of stock have the same rights, privileges and
advantages as regards dividends, voting at the
company’s meetings and other matters as if they held
the shares from which the stock arose.
(4) Such regulations of the company as are applicable to
fully paid-up shares shall apply to its stock.
(5) A company cannot offer its stock to the public; it can
only convert its paid-up shares into stock.

17. Procedure for converting shares
into stock :
 Passing an Ordinary Resolution in the Meeting of Shareholders:
Under the provisions of Section 61 of the Act, a company with limited
liability and having share capital may, if it is authorized by its Articles,
convert its fully paid-up shares into stock by passing an ordinary
resolution to that effect in the general meeting.
 Closing the Transfer Books and Informing the Shareholders:
After having passed the resolution to convert shares into stock, the
books are closed, and the shareholders are informed to submit their
share certificates to the company. The company issues a receipt to each
shareholder who has deposited his share certificate with the company.
The receipt is later exchanged for stock certificate by the concerned
shareholder.

18.  Issuing the Stock Certificate and Opening the
Register:
When the stock certificates are issued, the necessary entries
are made in the register of the company’s members. A new
register listing the company’s stock- holders is opened like
the register of the company’s members.
 Informing the Registrar of the Conversion: The
company needs to inform the registrar of Companies about
the conversion of shares into stock within thirty days after
the conversion is made.

19. Voting Rights of Preference
Shareholders
Issue Related to Their Interest: Holders of
preference share have the right to vote on such
issues as are directly related to their interest.

20.  Non-payment of Dividend: If the holders of
cumulative preference shares have not been paid
any dividend for at least two years preceding the
commencement of the company’s meeting, or if
the holders of non-cumulative preference shares
have not been paid any dividend for not less than
two years, or for an aggregate period of three years
comprised in the six years ending with the expiry
of the financial year preceding the commencement
of the meeting, then such shareholders are
entitled to vote on every resolution placed before
the company at any meeting.

21. Voting Rights of Equity
Shareholders
Every equity shareholder has the right to vote on
every resolution placed before the company at any
meeting. Also the voting right of every equity
shareholder is proportionate to his contribution to
the paid-up capital of the company.