Share and stock - class-X

The money raised by issue of equity shares is called equity share capital.Equity share represent the ownership of a company  and thus thus the capital raised by equity shares are also known as ownership capital or ownership funds.

Equity shares is the most important source of raising long term capital by a company.

Equity shares represent the ownership of the company. Equity share holders do not get a fixed dividend but are paid on the basis of earnings by the company.  They enjoy the rewards as well as bear the risks of theownership. Hence, Equity shares are suitable for investors who are willing to assume risk for higher returns.

Equity Share capital is also known as ownership capital or owner's funds. The merits of equity shares are, They provide credit worthiness to the company. Equity shares are suitable for investors who are willing to assume risks for higher returns, Equity capital serves as permanent capital.

Equity shares is the most important source of raising long term capital by a company. Equity shares represent the ownership of the a company and thus is known as owner's capital or owner's funds. 

Equity capital are permanent source of capital and can be only returned at the time of liquidation of the company. Thus equity capital stands last in the list of claims, it provides a cushion for creditors claims that needs to be settled at the time of liquidation.

Investors who need steady or fixed dividend from the capital invested may not prefer equity shares as they fluctuating returns on the basis of the earnings of the company and receive all the leftovers after all the other claims are delt with.

Equity share capital is the prerequisite before the creation of a company. 

Equity shares is the most important source of raising long term capital by a company. 

A company is an association of several persons. Decisions are made according to the view of the majority. Class meetings are meetings which are held by holders of a particular class of shares, e.g., preference shareholders. Such meetings are normally called when it is proposed to vary the rights of that particular class of shares.

A guarantee company is a type of corporation designed to protect members from liability. Guarantee companies often form when non-profit organizations wish to attain corporate status.  For a guarantee company the liability of shareholder is amount of guarantee specified in the memorandum.

Equity share holders are the owners of the company, equity shares are also known as owner's share capital or owner's fund. Equity share holders may receive dividend and/or bonus. The profits that the company earns after the repayment of creditors and other liabilities is received by the equity share holders.

The Rights Shares are allotted only to the existing equity shareholders. of the company. The shareholders who existed from earlier have the right to subscribe there shares.

 Section 53 of the Companies Act, 2013 prohibits to issue of shares at discount. It means this section prevents the process of issuing shares at a less price than the actual price.

• Sometimes a company may receive applications for a large number of shares than offered to public by it for subscription and this situation is termed as over-subscription.

• Therefore, such surplus (applications received > offered to public) is to be adjusted.

• Generally, it is stated in the given question that surplus money received on applications will be adjusted either on:

a)      Share allotment only or

b)      Share allotment and on subsequent calls

 But if question does not specify treatment then it is to be adjusted against allotment and surplus money is refunded by cash or cheque.

• For example:-

Question- A Company invited for 30000 equity shares of ₹ 10 each, payable ₹ 2 on application,₹ 3 on allotment and balance on call. Total applications money received at ₹ 2 per share was ₹ 72000. Application money should be adjusted against allotment and excess money is to be refunded by bank.

Solution- Total application money received is ₹ 72000

                   Number of applications received = Total application money received ÷ Rate of application money

                                                                           = ₹ 72000 ÷ ₹2  = 36000 shares

                   Number of shares to be issued    = 30000 shares

Number of application is more than shares to be issued hence, it is over- subscription. As given in question, company decides to allot 30000 shares in full and refund the excess money received on application by bank for 6000 shares at ₹ 2 per share.

As per companies act, 2013, every member of company limited by shares and holding any equity share capital shall have a right to vote in respect of such capital on every resolution placed before the company and his voting rights on a poll shall be proportionate to his share of the equity share capital of a company. Therefore, the statement that all equity shareholders have equal voting rights is FALSE.

Articles of unlimited company having share capital is included in Table I. An unlimited company refers to that company where the liability of the shareholders is not limited.

ROI= margin of 8% on sales * 4 = 32%

Owner's equity at the beginning= ending balance of owner's equity - net income + withdrawal amount - contributed amount = 21000-800+4000-6000 = 11000.

K$ _e$ = $\frac{D _1}{NP}$
Where NP i.(E) Net Proceed of shares = $\frac{1000 X12 - 5000}{10000}$
Dividend of a share (D$ _I$) = Rs. 1.8.

Like in the case of equity shareholders there is no obligatory payment to the preference shareholders and the preference dividend is not tax deductable.

Equity financing is the method of raising capital by selling company stock to investors. In return for the investment, the shareholders receive ownership interests in the company.

The shares of a company are transferable as the shares can be trade between buyers and sellers of the shares of the stock of the company at a mutually agreed price.

Equity share holders may receive  dividend and bonus on their investment. Dividend refers to the sum of money which are paid out of the total profits and bonus refers to the one time payment.

In dematerialization of shares depository participant  passes the physical shares to company for making it into electronic form. Depository participant refers to the agent between depository and investors.

Rematerialization of shares means getting the share certificate in physical form. It also refers to the process of converting the shares in physical form which are held into electronic form.

Shares in a public company are freely transferable. However, the shares issued by a private company are more restrictive towards transferability of shares.

A company funded through shares has a perpetual succession. Perpetual succession refers to the law of continuing the organization despite the death, insanity, exit of one member, etc.

Rematerialization connotes the act of converting the shares held in electronic mode, in the investor's account, into shares in physical form. It is a similar process like De-materialization of shares in which the physical shares are converted into electronic mode.

 Dematerialization is
the process by which physical certificates an investor are converted to
an equivalent number of securities in electronic format and credited in
the investor's account with a Depository held through a Depository
Participant(DP). In simple words, dematerialization refers to the conversion of physical form of share to electronic form.

Minimum Subscription: It is said to be the minimum amount which as per the directors must be raised by issuing shares to overcome various expenses like working capital required, preliminary expenses, repayment of money borrowed or any other payment etc. Company has to make sure that it must receive share applications for minimum subscription as mentioned in the prospectus, before it applies for the certificate pf commencement of business. Company has to refund back all the money received from the applicants and cannot make any allotment, if the amount of capital subscribed by the public is less than the minimum subscription or if the company could not get minimum subscription within 120 days of the issue of prospectus.

A Prospectus is a formal legal document that is required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering for sale to the public. 

Definition: An employee stock ownership plan (ESOP) is a type of employee benefit plan which is intended to encourage employees to acquire stocks or ownership in the company.

Description: Under these plans, the employer gives certain stocks of the company to the employee for negligible or less costs which remain in the ESOP trust fund, until the options vests and the employee exercises them or the employee leaves/retires from the company or institution.

These plans are aimed at improving the performance of the company and increasing the value of the shares by involving stock holders, who are also the employees, in the working of the company. The ESOPs help in minimizing problems related to incentives.