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    Shares: Presentation BY Mahender Vijaypal

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    Hemant Agarwal
    Ordinary shares represent ownership in a company. Shareholders are the legal owners and have rights to participate in profits, dividends, and assets upon winding up. Preference shares carry preferential rights to dividends, which may be fixed or variable, and preferential rights to repayment of capital upon winding up. Equity shares represent residual claims to income and assets and give shareholders voting rights and control over the company. A company's capital structure consists of share capital, which is divided into equity shares and preference shares, as well as loan capital in the form of debentures.

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    Shares: Presentation BY Mahender Vijaypal

    Uploaded by

    Hemant Agarwal
    35 views24 pages
    Ordinary shares represent ownership in a company. Shareholders are the legal owners and have rights to participate in profits, dividends, and assets upon winding up. Preference shares carry preferential rights to dividends, which may be fixed or variable, and preferential rights to repayment of capital upon winding up. Equity shares represent residual claims to income and assets and give shareholders voting rights and control over the company. A company's capital structure consists of share capital, which is divided into equity shares and preference shares, as well as loan capital in the form of debentures.

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    Mah Ender

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    Ordinary shares represent ownership in a company. Shareholders are the legal owners and have rights to participate in profits, dividends, and assets upon winding up. Preference shares carry preferential rights to dividends, which may be fixed or variable, and preferential rights to repayment of capital upon winding up. Equity shares represent residual claims to income and assets and give shareholders voting rights and control over the company. A company's capital structure consists of share capital, which is divided into equity shares and preference shares, as well as loan capital in the form of debentures.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    35 views24 pages

    Shares: Presentation BY Mahender Vijaypal

    Uploaded by

    Hemant Agarwal
    Ordinary shares represent ownership in a company. Shareholders are the legal owners and have rights to participate in profits, dividends, and assets upon winding up. Preference shares carry preferential rights to dividends, which may be fixed or variable, and preferential rights to repayment of capital upon winding up. Equity shares represent residual claims to income and assets and give shareholders voting rights and control over the company. A company's capital structure consists of share capital, which is divided into equity shares and preference shares, as well as loan capital in the form of debentures.

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    Download as PPT, PDF, TXT or read online from Scribd
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    of 24

    Shares

    PRESENTATION BY MAHENDER VIJAYPAL

    Definition
    Ordinary share represent the ownership position in the

    company. The holders of ordinary shares are called the shareholders and they are the legal owners of the company.
    By a share it also means right to participate in the profits

    made by a company, while it is a going concern and declares dividend, and in the assets of the company when it is wound up.
    A stock is defined as consolidated value of fully paid up

    shares of a member.

    Types of shares capital


    Equity shares capital Preference shares capital: Preference share is the one

    which satisfies the following criteria - With respect to dividend it carries a preferential right to be paid which may be a fixed amount or a fixed rate - On winding up or on repayment of capital a preferential right to be repaid the amount .

    Features of Preference Share


    Claims on income and assets

    Fixed Dividend
    Cumulative dividend Redemption

    Sinking fund
    Call feature Participation feature

    Hybrid Security

    Ordinary share Non payment of dividend does not force the company to insolvency Dividends are not deductible for tax purpose In some cases there is no fixed maturity date.

    Debenture Dividend rate is fixed

    Pref shareholders do not share in the residual earnings


    They have claim on income and assets prior to ordinary shareholders

    Types of Preference Shares


    Participating preference shares.:- they carry a right to participate in the surplus profit along with equity shareholders after dividend at certain rate has been paid to equity shareholders. Cumulative and non-cumulative shares Redeemable preference shares

    Fully or partly convertible preference shares.

    Voting rights for preference shareholders


    Every member of a company holding any preference shares

    has a right to vote only on resolutions placed before the company which directly affect attached to his preference shares
    Apart from this preference shareholders are entitled to vote

    if dividend has remain unpaid in case of cumulative as well as non cumulative for two years.

    Pros Risk less leverage advantage Dividend postpondability

    Fixed dividend
    Limited voting right

    Cons Non tax deductibility of dividend Commitment to pay dividend

    Equity shares

    Types of Equity Shares


    Authorized share capital Issued share capital

    Subscribed share capital


    Paid up share capital

    Issue price of shares: the price at which share is issued in the market. Paid up share capital = issue price * no. of ordinary shares. Issue price has two components
    1. 2.

    Par value Share premium

    Par value is the price per ordinary share stated in the memorandum of association. Generally they are in the denomination of 10 or 100. Any amount in excess of par value is called the share premium. Shareholders equity = paid up share capital + share premium + reserves and surplus = Net worth Book value per share = Net worth / no. of ordinary shares Market value of a share is the price at which it trades in the market. It is generally based upon the expectations about the performance of the economy in general and company in particular.

    Features of Equity Shares


    Residual claim to income
    Residual claim on assets Right to control Voting system Pre-emptive right Limited liability

    Evaluation
    Merits - it is a permanent source of fund without any repayment liability - It does not involve any obligatory dividend payment Demerits - high cost of fund reflecting the high required rate of return of

    investors as a compensation for higher risk - High floatation cost in terms of underwriting, brokerage and other issue expenditure - Dilution of control

    Method of Raising Capital


    By issue of prospectus
    Rights issue of equity shares. Private placement of shares

    Rights Issue of Equity Share


    It involves selling of ordinary shares to the

    existing shareholders.
    Law in India requires that the new ordinary

    shares must be first issued to the existing shareholders on a prorata basis


    No. of rights = existing share/ new share

    Shareholder
    A shareholder (or stockholder) is an individual or company

    (including a corporation) that legally owns one or more shares of stock in a joint stock company.
    Shareholders are granted special privileges depending on the class of

    stock, including the right to vote (usually one vote per share owned) on matters such as elections to the board of directors, the right to share in distributions of the company's income, the right to purchase new shares issued by the company, and the right to a company's assets during a liquidation of the company. However, shareholder's rights to a company's assets are subordinate to the rights of the company's creditors.

    Regulations
    Special resolution

    - company must pass special resolution - government must grant special approval under section 81(1A) Pricing price should not be lower than the higher of the average of the weekly high and low of the closing price of the shares quoted on the stock exchange during six months before the relevant date or two weeks before the relevant date. Open offer- a preferential allotment of more than 15% of equity necessitates an open offer. Lock-in-period one year lock-in-period

    Types of capital

    1.
    2.

    Each company has 2 types of capital Share capital Loan capital

    Meaning of Share
    The capital of a company is divided into a number of equal parts. Each part is called a Share. The Companies Act of 1956 defines a share as a share in the share capital of the company The persons who contribute money through shares are known as shareholders. The certificate stating the number of shares a shareholder holds is called a share certificate.

    1. 2. 3.

    Types of Shares Preference Share


    Cumulative Preference Share Non-cumulative Preference Share Participating Preference Share in this case surplus profits are also distributed amongst the preference shareholders. Non-participating Preference Share Redeemable Preference Share Convertible and non-convertible preference shares a convertible preference share can be converted into equity shares. Equity Share

    4. 5. 6.

    Share capital
    The memorandum of associations must state the amount of capital with which the company is desired to be registered & the number of shares into which it is to be divided. Total capital of company is divided into shares, therefore, it is called share capital.

    Kinds of Share Capital


    Authorized Capital given in the MoA, this is the

    maximum amount with which the company is registered and which it is authorized to raise from the public by issue of shares. Also called registered or nominal or authorized capital. Issued Capital the portion of authorized capital which is offered to the public for subscription is called issued capital and the remaining portion not yet offered to the public for subscription is called unissued capital. Subscribed Capital the portion of issued capital which has been subscribed for by the public, I.e., applied for and allotted by the company. The balance os issued capital not subscribed for by the public is called the unsubscribed capital.

    Principal sources of Capital Reserve


    Profit on sale of fixed asset 2. Profit on revaluation of assets & liabilities 3. Profit on forfeiture & re-issue of forfeited shares 4. Profit on redemption of debentures at a discount 5. Profit earned by a company prior to its incorporation Capital reserve is shown in the liabilities side of balance sheet under the head reserves and surplus
    1.

    THANK YOU

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