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Kinds of Share Capital

The share capital of a company having liabilities limited by one shares will be of the following two types 1. Equity Share Capital – Equity share capital means that capital which is not preference share capital. In other words, equity share capital means that capital whose holders do not get the following rights-

(i) Right to receive dividend on preference basis

(ii) Right to get preference in return of capital in case of winding up of the company.

Thus, the holders of equity share capital are given dividend after paying dividend on preference share capital and if there is no dividend left after this distribution then they do not get anything. The rate of their dividend is determined by the operators. The holders of equity shares take an active part in the management of the company, elect the board of directors by voting rights and exercise control over the company through annual general meetings. In fact, the holders of equity share capital are the real owners of the company. Equity share capital can be of any of the following types:

(i) Share capital with voting right;

2. Preference Share Capital In the case of a company limited by shares, preference share capital means such part of the equity capital issued by the company which enjoys priority in the payment of dividend and in the payment of capital on the dissolution of the company.

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