What are Shares and Types of Shares,Shares,Types of Shares,Shares meaning and Types,
Different types of shares,
Different types of shares

What are Shares and Types of Shares

To know shares and its types, one must have a basic knowledge about shares and its role during a company. Shares are an instrument for raising capital for a business by distributing it to investors.

Shares meaning and Types:

A share is referred to as a unit of ownership which represents an equal proportion of a company’s capital. A share entitles the shareholders to an equal claim on profit and losses of the company. There are majorly two kinds of shares i.e. equity shares and preference shares.

Different types of shares
As per section 43 of the Companies Act 2013, the share capital of the company is of two types:

Shares mean a part in the ownership of the company. Issuing shares to the investors and the general public is a method to raise capital for the company and provide the shareholders with a small wedge of ownership in the business. There are various sorts of share a corporation can prefer to issue to its potential investors. However, there are 4 most preferred sorts of shares issued by companies in India.

Under the Companies Act, 2013, a share certificate needs to be issued by a business every year post its incorporation, stating the names of persons who are owners of the company’s shares. Every company needs to adhere to the Annual Compliance of issuance of share certificate within 2 months after its incorporation.

In case the company defaults in adhering to the compliance relating to the issuance of share certificates, it would be punishable with a minimum fine of Rs. 25,000 that could extend up to Rs. 5 lakhs. Every defaulting officer of the corporate would also face a fine of Rs. 10,000 which could extend up to Rs. 1 lakh.

Types Of Shares

Equity Shares: Also referred to as the standard shares, equity shares are the foremost common sort of share. Equity shares are equal in value and also impart voting and other rights, dividend and other such rights to the shareholders. Equity shares are traded on the stock exchange are issued are different face values.

Preference Shares: As the name suggests, preference shares are preferential in nature. In the events of liquidation of the company, the preferential shareholders are paid out first after settling the debts of the creditors of the company. However, preference shareholders don't get a right . There are different types of preference shares including:

Cumulative Preference Shares: A cumulative preference shareholder features a right to say fixed dividend of the present year out of the longer term profits. The dividend accumulates unless it is paid to the shareholder. The accumulated arrears of dividend are to be paid before anything is paid out of the profits to the holders of any other class of shares.

Non-cumulative Preference Shares: Non-cumulative preference shares are those shares wherein the dividend is paid only out of the profits earned by the company in the financial year and cannot accumulate to be paid out of profits in future. The shareholder cannot claim any dividend if the company has not earned any profits in that financial year.

Participating Preference Shares: just in case of participating shares, the shareholders can claim a hard and fast rate of dividend also as participate with the equity shareholders in surplus profits remaining then the dividend is paid to equity shareholders.

Non-participating Preference Shares: The shareholder can only claim a hard and fast rate of dividend and can't participate within the surplus profits of the corporate .

Convertible Preference Shares: The shareholders get a right to convert their preferred stock into equity shares within a particular period of your time .

Non-convertible Preference Shares: These preference shares cannot be converted into equity shares at a later stage.

Redeemable Preference Shares: Redeemable preferred stock are often redeemed after a particular period or after giving a particular notice at any time at the desire of the corporate out of the profits of the company or sale proceeds of the new shares.

Irredeemable Preference Shares: Irredeemable preferred stock are permanent in nature and can't be redeemed during the lifetime of the corporate .

Preference Share Capital

Preferential shares are preferential in nature. During the liquidation of the company, the shareholders holding preferential shares are paid out first after settling the debts of the creditors of the company. Also, preferential shareholders do not have any voting rights. Various types of preferential shares are seen based on structure, maturity terms, nature of dividend payment, etc. below are some common types:

Cumulative Preference Shares:

Arrear will be received in subsequent years

At the time of inadequate profit, you will not lose anything.
The fixed rate of dividend is guaranteed.

Non-cumulative Preference Shares:

At the time of inadequate profit, they're going to not get anything.
Fixed rate of dividend is guaranteed.
Participating Preference Shares

Entitled to share the surplus profit
Fixed rate of dividend is guaranteed
Non-participating Preference Shares:

Does not share the surplus profit.
Fixed rate of dividend is guaranteed.
Convertible Preference Shares

It are often converted into Equity shares within a particular period.
Non-convertible Preference Shares:

It cannot be converted into Equity shares.
Redeemable Preference Shares:

Shares which a corporation may repay after a hard and fast period of your time or earlier.
Irredeemable Preference Shares:

Shares are repayable only at winding up.
It doesn't carry the arrangement for redemption. .

Equity Share Capital:

Equity Shares are also known as ordinary shares. Equity shares are one among the foremost common sorts of share. These are equal in value and also impart various rights like voting rights, dividends, etc. to the shareholders. These shares are traded in stock exchange and are issued at a face value.

Why are shares issued by a company?

Issuing shares in share market can provide the following advantages:

New finances
Market valuation for the company
A mechanism for an investor to trade shares
Why invest in shares?
When an investor invests money in the stock market, it has the potential to grow rather than keeping money in a savings account. There are two ways through which you can make money from shares i.e. capital gains and income.

How to buy shares?

To buy shares you have to hold a Demat account is an account that holds your shares and securities in an electronic form. Following documents are required to open an account:

PAN card
Canceled cheque

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