Equity Share Capital V/S Preference Share Capital

Types of Shares 

A share is the interest of a shareholder in a definite portion of the capital.

According to Section 43 of the Companies Act, 2013, the share capital of a company is of two types:

1. Preferential Share Capital

2. Equity Share Capital 

Preference share capital is the part of the capital of the company which- 

• Carries a preferential right as to payment of dividend at a fixed rate during the lifetime of the company.
• Carries, on the winding up of the company, a preferential right to be repaid the amount of capital paid up.

Preference Shares can be further classified into-

1. Participating preferential shares.

2. Cumulative preferential shares

3. Non-Cumulative preferential shares

4. Redeemable Shares and

5. Irredeemable Shares

Equity share capital with reference to a company, limited by shares, means a company which is not preference share capital.

After satisfying the rights of preference shareholders, the equity shareholders shall be entitled to share in the remaining amount of distributable net profit of the company. Equity share capital is the sum total of equity shares. The dividends on equity shares is not fixed It will be changing according to the magnitude of available profit for distribution in the form of Dividends.

Equity share capital of a company may consist of equity shares:

• With voting rights,
• With differential rights as to dividend, voting or otherwise in accordance with such rules and subject to such conditions as may be prescribed.