As per section 85(2) of the Companies Act, 1956, equity shares are defined as the shares, which do not have the following preferential rights −
● Preference of dividend over others.
● Preference of repayment of capital over others at the time of repayment of the company.
● These shares are also called ‘risk capitals’.
● They only claim dividends.
● The equity shareholders have the right to veto on each and every resolution passed by the company.
Shares capital may mean any of the following divisions in capital −
● Authorized capital
● It is the amount stated as share capital in the Capital Clause of the memorandum of association of the company. This is the maximum limit amount, which is authorized to be raised by a company. A company cannot raise money above this amount unless the memorandum of association is amended.
● Issued Capital
● It is a nominal part of the authorized capital, which has been
ü Subscribed by the signatories of the memorandum of association.
ü Allotted for cash or cash equivalents and
ü Allotted as bonus shares.