Class of Shares, Financial Shares and Share Capital – The authorized capital of a company is divided into several small equal parts. Divided one says share in one part. Companies Act of 1994 states that ‘Share’ means Share in the Capital of the Company, and includes stock except when a distribution between stock and Shares is expressed or implied.
We briefly discuss this topic What is Share and Share Capital,Show the classification of shares or Show the Class of Shares. Or, describe how many shares can be divided into categories, Or Give the description how to divide the Classification of Share, Lets Strat –
If any difference in a share or share is expressed backwards or inadvertently, it will be included in the definition of stock other than stock. The joint venture collects the required capital or funds through the sale of shares. Shares are mainly divided into three categories as per the provisions of the Companies Act. Namely:
- 1. Ordinary shares
- 2. Preferred shares and shares of
- 3. late claimants or entrepreneurs.
It is divided into several parts according to the nature of the company’s capital and the provisions of the law.
The following is the list of them.
1. Authorized or Nominal or registered Capital:
The maximum amount of capital mentioned in the company’s memorandum (Memrandum) is called authorized or named or registered capital.
For example, Abhaman Publishing Ltd. had a capital of Rs. 10,000,000 in its memorandum at the time of its formation. The registered capital is Rs 10 lakh. The company has 10,000 ordinary shares. That means the price of each share will be 100 rupees.
2. Issued Capital:
The portion of authorized capital that is presented to the public for sale in the form of shares is called issued capital. Out of the 10,000 ordinary shares, 5,000 shares were actually issued for the purpose of sale i.e. Rs. 500,000 (5,000 x 100) will be: Issued capital.
3. Subscribed Capital:
The portion of the issued capital for which an application is received for purchase and is distributed or the number of shares sold is called Subscribed Capital.
4. Called up capital:
It is the share capital that the shareholders have already been asked to pay for the paid up capital.
5. Paid up Capital:
The portion of paid up capital paid by the shareholders is the paid up capital. However, the part of the summoned capital which is not recovered is called unpaid capital.
What is Class of Share ?
Class of shares As there is no single nature of investment in the business world, there is no end to the variety of investors. An investor wants to get the same benefits from investing in a business. A company introduces different types of shares in the market based on the preferences and dislikes of the investors. Similer – Principles of Business Finance. Top Two Types Of Finance. Importance of Business Finance.
Description and Classification of Class of Shares:
The types of shares that are commonly seen are discussed below:
1. Preference stock:
Preference shares are those shares in which the owners of the company have priority in both the distribution of dividends and the return of capital at the time of liquidation. Priority shares can be divided into six parts according to the dividend distribution rate and distribution process. E.g.
i. Cumulative Preferred Stock:
The dividend of the preferred shareholders due to loss of business for the next year is called cumulative preferred stock.
iii. Non-Cumulative Preferred Stock:
They only get this year’s profit on a priority basis.
iv. Participating Preferred stock:
The first valuation of a share yields a dividend at a fixed rate, but later it receives a share again in the case of distribution of dividends among the owners of ordinary shares, which is called participating priority shares. “Preferred stock)
v. Non Participating Preferred stock:
It is the distribution of dividends among the preferred shareholders who receive profits but not ordinary shareholders.
vi. Redeemable and Non – Redeemable Preferred stock:
The amount of money invested in a preference share that is repaid at regular intervals is called a repayable preference share. Such preference shares are called unpaid preference shares.
Vii. Convertible and Non – Covertible Preferred stock:
Convertible and non – Covertible Preferred stock 1 If not, it is called non-convertible shares
2. Common stock:
Ordinary shares are those shares which do not give any priority to the return of profit or capital of the company. There will be no guarantee of profit in such shares. After distributing the profits to the preferred shareholders, the remaining profits are distributed among them. However, such shareholders can participate in the selection of directors of the company.
3. Differed stock:
The shares that are paid after the return of profit and capital of the preferred and ordinary shares are called delayed shares.
What is Common Stock?
Ordinary shares Each of the smallest equal parts of the total authorized capital of a company is called a single share. The joint stock business sells the shares to raise the required capital. Ordinary shareholders are the owners of the company. The shares are usually sold in the stock market. Liabilities of such shareholders are limited by their purchased shares.
Act, 1994 deals with such shares. Shares shall mean any part of the capital of the Company and in case of express or implicit disclosure of any stock or share difference, other than that stock shall also be included in this definition.
Features of Common Stock Capital
The main features of common stock are discussed below:
1. Ownership: Ordinary shareholders are the real owners of the company. So equity or ownership can be expressed by ordinary shares. And those who buy all these shares get the status of the owner of that company.
2. Voting Right: Ordinary shareholders can exercise their voting right to reach a decision on any matter of the company starting from the appointment of the director.
3. Limited liability: The liability of ordinary shareholders is limited by the amount of their investment that is why a joint stock company is called a ‘limited’ or ‘limited liability’ company.
4. Control: Control of all the activities of the company is usually in the hands of ordinary shareholders. The board of directors elected by them controls the management and overall activities of the company.
5. Transferability: Ownership of common shares can be transferred through sale in the secondary market.
6. Life – Long Maturity: Ordinary shares have no fixed maturity period. As long as the company exists, the ownership of ordinary shareholders will remain. As a result it is permanent.
7. Right on profit: Ordinary shareholders have full right to enjoy the capital remaining after payment of fixed or fixed liabilities of the business organization or company.
In the light of the above discussion, it can be said that the characteristics of ordinary share capital in general have given it a special nature. In addition, the features include specific features such as external value, market value, equivalence, dividend, etc. Related post: Break – Even Point Analysis A to Z, Goal of the financial manager, What Is Bond? Discuss A to Z and, Advantages And Disadvantages Of Time Value of Money. Definition of Time Value of Money & Importance Of Time Value Of Money.
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