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Section 43 of the Companies Act 2013: Kinds of Share Capital

SECTION-43 (Kinds of share capital) under CHAPTER-IV (Share Capital and Debentures) of the Companies Act, 2013

The share capital of a company limited by shares shall be of two kinds, namely:—

(a) equity share capital—

(i) with voting rights; or 
(ii) with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed; and
(b) preference share capital:

Provided that nothing contained in this Act shall affect the rights of the preference shareholders who are entitled to participate in the proceeds of winding up before the commencement of this Act.



Explanation.—For the purposes of this section,—

(i) "equity share capital", with reference to any company limited by shares, means all share capital which is not preference share capital;


(ii) "preference share capital", with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to—

(a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income-tax; and 
(b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company;
(iii) capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely:—
(a) that in respect of dividends, in addition to the preferential rights to the amounts specified in sub-clause (a) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid; 
(b) that in respect of capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in sub-clause (b) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.



Extra Notes for Readers

(1) The Companies Act, 2013 received the assent of the President on the 29th August, 2013 (Published in the Gazette of India, Extraordinary, Part II - Section 1 by Ministry of Law and Justice, Legislative Department on 30th August, 2013) - link


(2) Section 43 of the Companies Act 2013 was notified by MCA Notification S.O. 902(E) dated 26th March 2014 (w.e.f. 1st April 2014) - link

(3) Refer the following rule(s) of the Companies (Share Capital and Debentures) Rules, 2014 - link :

  • Rule 4 - Equity shares with differential rights
(4) Exemption to Private Companies - MCA Notification G.S.R. 464(E) dated 5th June 2015 - link

Sl. No.
Chapter/ Section number/ Sub-section(s) in the Companies Act, 2013
Exceptions/Modifications/Adaptations
1.
Chapter IV, Section 43
Shall not apply where memorandum or articles of association of the private company so provides.

(5) Exemption to Specified IFSC Public Company - MCA Notification G.S.R. 08(E) dated 4th January, 2017 - link

Serial
Number
Provisions of the Companies    Act,    2013 (18 of 2013)
Exceptions/Modifications/Adaptations
1
Section 43
Shall   not   apply   to   a   Specified   IFSC   public   company,   where memorandum of association or articles of association of such company provides for it.






This page was last updated on 7th January, 2017.

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