Fundamentals of Financial Management, Third Edition

15.1 EQUITY SHARES

Section 2 (46) of the Indian Companies Act, 1956 defines a share as “a share in the share capital”. A company, other than that one limited by guarantee, has got the statutory right to raise capital through the issue of shares. As mentioned earlier, there are two kinds of shares: ordinary or equity shares and preference shares.

15.1.1 Features of the Equity Shares

Permanent Capital Base: The equity shares represent a company’s permanent capital base, that is, the capital that is returned to the shareholders only after the company’s lifetime comes to an end or it goes into liquidation. However, it is not certain what amount the shareholders will get at such time. In fact, the shareholders are paid an amount only after meeting ...