It is necessary to have an understanding of shares and their types in order to be able to understand the role of shares within a company. Shares can be used to raise capital by distributing it among investors.
A share, also known as a unit or ownership, is an equal amount of capital of a company. Each shareholder has equal rights to profit and loss of the company. Equity shares and preference shares are the two types of shares.
The Companies Act 2013 section 43 states that the shares of a company can be of one of two types.
Preferential shares have preferential nature. Priority shares that are held by shareholders will be paid first, after the creditors have settled their debts. Preferential shareholders don't have voting rights. Different types of preferential shares can be classified based on their structure, maturity terms, and nature of the dividend payment. These are some examples below.
Cumulative Preference shares:
Non-cumulative Preference shares:
Participating Preference shares
Non-participating Preference shares:
Convertible Preference shares
Non-convertible Preference shares:
Redeemable preference shares:
You cannot redeem your preference shares
Also known as ordinary shares, equity shares are also called ordinary shares. One of the most popular types of shares is equity shares. These shares are equal in price and confer various rights such as voting rights, dividends and so on. To the shareholders. These shares can be traded on stock exchanges and are issued at face value.
The following benefits can be derived from the issuance of shares on the share market:
An investor who invests in the stock market has the potential for it to grow, rather than being saved in a savings account. You can make money with shares in two ways: Capital gains and income.
A Demat account is required to purchase shares. It holds securities and shares in electronic form. You will require these documents to open an account.