Shares , Debentures & Prospectus
Shares:
Capital of the company is divided into several small units and each unit is called share. Shareholders are the owners of the company. Shares give the right to the shareholders to receive their share in profit.
Kinds of shares:
Following are the kinds of shares
1. Equity or Ordinary (get dividend on net profit, after preference shareholders, it is not fixed at all)
2. Preference (fixed rate of dividend, receive before other shareholders)
a. Cumulative (can claim dividend for those years in which there were no profit)
b. Non-cumulative (can’t claim dividend for those years in which there were no profit)
c. Participating (get fixed rate of dividend + surplus profit with ordinary shares)
d. Non-participating (get fixed rate of dividend only)
e. Convertible (holder can convert into equity shares at specific period of time)
f. Non-convertible (holder can’t convert into equity)
3. Deferred (called founders or management shares, issued to the promoters, it has not fixed rate)
4. Bonus (doesn’t pay dividend in cash form, issue shares to increase the capital)
5. Right (when more capital is required)
Share Capital:
In simple words, the term capital means the amount of money with which a business started. In case of a company, the term share capital refers to the amount of money raised by issue of shares.
Kinds of Capital:
Following are the kinds of the capital
1. Authorized or Registered Capital (it is the maximum amount of share capital which a company is authorized to issue)
2. Issued Capital (out of authorized the amount which is issued to public)
3. Subscribed Capital (amount issued against the accepted application)
4. Called up Capital (amount on the shares which is actually demanded by the company to be paid)
5. Paid up Capital (amount paid by the shareholders on application on each share)
6. Reserved Capital (amount which is not call up by the company except in case of winding up)
Debentures:
The companies to secure loan issue the debentures. In simple words, debenture is a written letter of acceptance issued for securing loan by the company in which interest rate, surety, and conditions regarding return of loan are recorded.
Kinds of Debentures:
Following are the kinds of debentures
1. Simple or Ordinary or Naked Debentures (which don’t carry any security in respect of repayment of interest or principal)
2. Mortgaged or secured Debentures (if the company keeps some security for the loans secured through debentures, these debentures called mortgage debentures)
3. Registered Debentures (written against particular person)
4. Bearer Debentures (like bearer cheques payment made on coupons)
5. Redeemable Debentures (issued at the condition that amount of loan will be returned after a specific period)
6. Irredeemable Debentures (that is not payable during the life time of the issuing company)
Prospectus:
After obtaining the certificate of incorporation, the promoters need the capital for the company. A public company may issue a prospectus for this purpose. Prospectus means any advertisement, notice or information by which the general public is invited for the purchase of the share or debenture of the company the term and conditions contained in it