Q.What is a share? State the kinds of share capital a company can issue under the Companies Act, 2013.

A share is the basic unit of a company's capital, and the law recognises only two kinds of it, each carrying a very different bundle of rights.

Equity shares carry no preferential rights and full control; preference shares carry preferential dividend and repayment rights but ordinarily no vote.

Section 2(84) of the Companies Act, 2013 defines a share to mean a share in the share capital of a company, and includes stock. It is the smallest unit into which a company's total share capital is divided, each unit carrying a face value stated in the company's Memorandum of Association, and the person to whom shares are allotted becomes a shareholder, or member, of the company, with rights to receive dividend when declared, to inspect the company's statutory registers, and to attend and vote at general meetings (for equity shares).

Section 43 of the Companies Act, 2013 restricts a company limited by shares to issuing only two kinds of share capital. Equity share capital carries no preferential right whatsoever, either to a fixed rate of dividend or to priority repayment of capital on winding up — equity shareholders are the company's residual claimants, entitled only to whatever is left over once every other claim has been satisfied, but in exchange they enjoy full voting rights and, through them, real control of the company. Preference share capital, by contrast, carries two preferential rights over equity share capital: the right to receive dividend, at a fixed rate, before any dividend is paid to equity shareholders, and the right to the return of capital ahead of equity shareholders if the company is wound up — but preference shareholders ordinarily have no right to vote at all, except on resolutions that directly affect their own class of shares. Every preference share issued today must also be redeemable, since Section 55(1) bars a company from issuing irredeemable preference shares.

Students often list equity and preference shares as though the Act permits companies to invent further kinds at will; Section 43 is a closed list of exactly two. Another common slip is describing preference shareholders as having 'no voting rights at all' without the qualification — they do vote on resolutions directly affecting their own class, and on a resolution where their dividend has remained unpaid for two years or more.