Answers:
a) Shares and its
classification: Section 2 (46) defines a share “as a share in the share
capital of a company and includes stock except where a distinction between
stock and share is expressed or implied”.
The most common classes of
shares are:
·
Preference
·
Equity
or Ordinary
·
Deferred
or Founders’
1.
Preference
shares
A preference share is one that carries the following two
rights over holders of equity shares:
·
A
preferential right in respect of dividends at a fixed amount or at a fixed
rate, and
·
A
preferential right in regard to repayment of capital on winding up.
2. Equity shares
Equity share’ means a share
that is not preference share (Section 85). The rate of dividend is not fixed.
The Board of Directors recommends the rate of dividend that is then declared by
the members at the Annual General Meeting.
3. Cumulative Convertible
Preference Shares (CCPs)
The Government of India
vide its guidelines dated 19 August 1985 permitted issue of another class of
shares by public limited companies, called cumulative convertible preference
shares.
4. Deferred or founder’s
shares
A private company can issue
shares of a type other than those discussed above (Section 90). Thus, it may
issue what are known as deferred shares.
5. Non-voting shares
‘Non-voting shares’ as the
term suggests are shares that carry no voting rights. These are contemplated as
altogether a different class of shares which may carry additional dividends in
lieu of the voting rights..
6. Sweat equity shares
The Companies (Amendment)
Act, 1999, allowed issue of sweat equity shares subject to fulfillment of
certain conditions. The new Section 79A was inserted for this purpose.