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Share Capital: Equity Capital Preference Capital

This document discusses various types of share capital including equity capital, preference capital, authorized capital, issued capital, and paid up capital. It also discusses bonus shares which are issued to existing shareholders without consideration from reserves. Other topics summarized include stock splits which proportionately increase shares by reducing face value, buybacks which reduce capital base, sweat equity offered to promoters/directors for consideration other than cash, and employee stock option plans (ESOPs) which aim to retain intellectual capital through equity grants to employees.

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Sudhir Kumar Yadav
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63 views

Share Capital: Equity Capital Preference Capital

This document discusses various types of share capital including equity capital, preference capital, authorized capital, issued capital, and paid up capital. It also discusses bonus shares which are issued to existing shareholders without consideration from reserves. Other topics summarized include stock splits which proportionately increase shares by reducing face value, buybacks which reduce capital base, sweat equity offered to promoters/directors for consideration other than cash, and employee stock option plans (ESOPs) which aim to retain intellectual capital through equity grants to employees.

Uploaded by

Sudhir Kumar Yadav
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Share Capital

Equity Capital

Preference Capital

Authorized

Issued

Paid up

Partici pating

Cumu lative

Redee mable

Convertible

Face Value = Amount mentioned on share certificate irrespective of market price

Bonus Share

Issued to existing Shareholders. Issued without consideration of cash or kind. Converted from reserve & surplus Issued by companies where large accumulative free reserve exists i.e Out of free reserve. Can be issued by companies who have issued/ public Issue / right issue after twelve month AOA & Board approval needed. Specific reserve such as revaluation reserve share fluctuation reserve can not be used.

Advantage
Bridges

gap between capital and fixed assets.

Increases market price of shares.

Create market reputation.


Increases liquidity of shares.

Create confidence of shareholders

Disadvantage

Increase of capital base. Leads reduction in EPS. Higher pay-out of dividend in future. Issued without receiving money Cannot be issued very frequently.

Stock Split

Issuing additional shares by reducing face value of

stock to the existing share holder.


for example:- Rs. 10 Face Value Per Share = Splited into Rs. 1 per share to 10 number.

Buy Back
1. Rarely done. 2. Legal formalities, SEBI, ROC, RESOLUTION, APPROVAL to be confirmed 3. Reduces capital base 4. Tools of restructuring capital

Stock split does not effect financial


accounting of the company Issued when stock prices are very high. Wider Investor base can find easy to trade in market stock exchange.

Average trading volume increases.

Indicates managements conviction to sustain higher profit growth.

SWEAT EQUITY

Offer to the promoter or director.


Issued at discount or for consideration other than cash providing know how. Lock in period generally three years.

Book Building

Proportionate basis through tender office

Stock exchange

By Back

Open Market

odd lot holders

Employees stock option plan -ESOP

Aim is to retain intellectual capital.

Employee & direct (holding less than


10% percent equity) can go No promoter

right , not an obligation granted to an employee. Issued at lower price. Always lock- in period. Employee become owner of the company to work with more dedicated and harder

Debenture

Cumulative

Non-Cumulative

Redeemable

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