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.