Finance is the lifeblood of a company, without it company cannot survive. Finance can be raised by issuing shares and debentures. In fact, shares and debentures are financial instruments which help in arranging funds for the company.
Share Capital– share includes stock in the share capital of a company.
The share capital of a company is divided into small units having a certain face value. Each such unit is termed as share.
When these shares (either in part or whole) are allotted to various persons, on the date of allotment, they become shareholders of the company.
Types of Share Capital:- Broadly, there are two types of share capital of a company limited by shares:
- Preference share capital :-
preference share capital as instruments which have preferential right to dividend payment (absolute/fixed or ad-valorem/ %) and preferential repayment during winding up of the company.
Preference shareholders enjoy preferential rights in the matter of :
(a) Payment of dividend &
(b) Repayment of capital
2. Equity share capital :-
means all share capital which is not preference share capital. It indicates ownership in a company.
(a) Equity shareholders have voting rights.
(b) Differential rights to dividend.