Share, Capital &
Borrowing
Presented by:
Aveenash
Shahneel
Vijay
Shares.
Certificate representing one unit of ownership in a
corporation.
Types of shares:
There are basically two types of shares:
Equity shares (Common shares)
Preference shares
Equity Shares
They are ordinary shares with no guarantee of
dividend and possessing voting rights. Equity shares
gain maximum returns when there are high profits.
Preference shares
provides the preferential right regarding dividend,
which is paid at fixed rate.
Provides precedence in terms of liability over common
stock in the event of winding up.
Types of preference shares
• Cumulative and Non-cumulative:
• Cumulative: Preferred stock on which dividends
accrue in the event that the issuer does not make
timely dividend payments.
• Non Cumulative: A non-cumulative or simple
preference shares gives right to fixed percentage
dividend of profit of each year.
Redeemable and irredeemable
Redeemable are preference shares with the expressed
condition that issuing company has the right to
repurchase shares as specified.
Irredeemable are preference shares which need not to
be repaid by company except in case of winding up.
Participative & non participative preference
shares
In participative preference shares the owner is entitled to
fixed rate of dividend along with the right to
participate further in future profits.
In non participative preference shares the owner has no
right over the further future profits after dividends
have been distributed.
SHARE CERTIFICATE
Stock certificate (also known as certificate of stock or
share certificate) is a written document signed on
behalf of a corporation, and serves as legal proof of
ownership of the number of shares indicated.
Part 2:
Shahneel Ahmed
Borrowing
Borrowing: Receiving something of value in exchange for an obligation to pay
back something of usually greater value at a particular time in the future.
Companies borrow money to aid short term and long term cash flow.
Types:
Debentures and bonds
Loans and banks and financial institutions
Acceptance of deposits
Debenture
Debenture means a document which either creates a debt or acknowledges it.
Debenture is a certificate of loan issued by the company acknowledging the
indebtedness of the company.
Debentures are usually long term and unsecured debt security.
Loans from banks
A bank loan is an extension of credit, to a consumer or business, in the
form of borrowed funds which has to be paid back with interest.
Usually for short term, to be repaid with interest on or before a fixes
date.
Types of share capital
Types of share capital
Authorized Capital: Authorized capital is the amount of share capital
which a company is authorized to issue by its MEMORANDUM OF
ASSOCIATION. The company cannot raise more than the amount of
capital as specified in the Memorandum of Association.
Issued Capital: It is that part of the authorized capital which is
actually issued to the public for subscription including the shares
allotted to members. The authorized capital which is not offered for
public subscription is known as ‘unissued capital’. Unissued capital
may be offered for public subscription at a later date.
Subscribed Capital: It is that part of the issued capital
which has been actually subscribed by the public. means
that part of the issued capital at nominal or face value
which has been subscribed or taken up by purchaser of
shares in the company and which has been allotted.
Called-up Capital: It is that part of the subscribed capital which has
been called up on the shares to pay the balance. The company may decide
to call the entire amount or part of the face value of the shares. For
example, if the face value (also called nominal value) of a share allotted is
Rs. 10 and the company has called up only Rs. 7 per share, in that
scenario, the called up capital is Rs. 7 per share. The remaining Rs. 3 may
be collected from its shareholders as and when needed.
Paid-up Capital: means the total amount of called up share capital
which is actually paid to the company by the members. If any of the
shareholders has not paid amount on calls, such an amount may be
called as ‘calls in arrears’. Therefore, paid-up capital is equal to the called-
up capital minus call-in-arrears.
Uncalled Capital: That portion of the subscribed capital
which has not yet been called-up. As stated earlier, the
company may collect this amount any time when it needs
further funds.
Reserve Capital: A company may reserve a portion of its
uncalled capital to be called only in the event of winding up
of the company. Such uncalled amount is called ‘Reserve
Capital’ of the company. It is available only for the creditors
on winding up of the company.
Part 3:
Vijay
DEBENTURES
A debenture is a document or a certificate of loan issued by
the company either creates a debt or acknowledges.
the term is used for a medium- to long-term
debt instrument used by large companies to borrow money.
Examples: Term finance certificates, bonds, loan stock,
engro rupya certificates etc.
Types of debentures
There are two types of debentures
1.Convertible debentures
2.Non-convertible debentures
Convertible debentures:
bonds that can be converted into equity shares of the
issuing company
Non-convertible debentures:
Which are simply regular debentures, cannot be converted
into equity shares.
Features of debentures
It is an acknowledgement of indebtedness of the
company to its holder for the amount stated in the
certificate.
Issued under seal of the company
Fixed percentage is on specified principle amount
Holder has no right to voting
Fixed maturity time period
Difference b/w shares and debentures
Debenture sample
Share sample
Shares are part of the equity shares while
Debentures are part of the loan
Fixed dividend percentage is paid on debentures
No fixed dividend
Debentures have a charge on the assets
While Shares have no charge
Interest is payable on debentures whether the profit is
made or not.
In shares dividends are paid from profits only
Debentures do not carry voting rights but convertible
debentures may at the option of a company
Debentures are redeemed
But shares cannot be bought back
