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Shares and Types/Kinds of Shares in Company Law in India


• Chapter IV (Sections 43 to 72) of the Companies Act, 2013 on Share Capital and Debentures
• The Companies (Share Capital and Debentures) Rules, 2014

Definition of "Shares" in Company Law

The definition of shares is provided under sub-section (84) of section 2 of the Companies Act, 2013.

Share means “a share in the share capital of a company and includes stock.”

A share is a type of securities

The term "Securities" is defined in Section 2(81) of the Companies Act, which refers to the definition of the securities as given in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.

Types of Securities - Examples: shares, stocks, scrips, bonds, debentures, debenture stock or other similar marketable securities, derivatives, security receipts, units of mutual funds, government securities, etc.

Nature of Shares

The shares of any member in a company shall be movable property.

Shares are transferable in the manner provided by the articles of association of the company.

Ref: Section 44 of the Companies Act

Numbering of Shares

Section 45 mandates it on all the companies having a share capital to distinguish each share of the company by its distinctive number.

Types/Kinds of Shares

As per section 43 of the Companies Act, the share capital of a company limited by shares shall be of the following two kinds only:
1) Equity Share Capital; and
2) Preference Share Capital.

What is Equity Share Capital? Meaning

Equity share capital means all share capital of a company limited by shares which is not preference share capital.

Types of Equity Shares

There can be two kinds of equity shares:
1) Equity shares with voting rights;
2) Equity shares with differential rights as to dividend, voting or otherwise.

What is Preference Share Capital? Meaning

"Preference share capital" means and includes that part of the issued share capital of a company limited by shares which carries or would carry a preferential right with respect to:

Dividend: Payment of dividend to the preference shareholders either as a fixed amount or as an amount which is calculated at a fixed rate periodically, which may either be free of or subject to income-tax.

Repayment: In case of winding up of the company or repayment of capital, repayment 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, as specified in the memorandum or articles of association of the company.

Types of Preference Shares

The following are the various kinds of preference shares, which are issued by a company subject to compliance under the company law:

• Cumulative Preference Shares
• Non-cumulative Preference Shares
• Redeemable Preference Shares
• Non-redeemable Preference Shares
• Convertible Preference Shares
• Non-convertible Preference Shares
• Participating Preference Shares
• Non-participating Preference Shares

different types of shares in company law


  1. Abhinav Shukla18 June, 2018

    It is very informative. Thank you


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