In India, the BSE and NSE are the largest exchanges.
Then, you can look up on NASDAQ, FTSE, Tokyo Stock Exchange and other entities. You will be surprised by the wide range and how various exchanges operate. Tasks for advanced commerce students: Now that you know of Stock Exchanges, find out the details of some of the world’s largest exchanges. Note that if a certain company is running in losses and is unable to issue dividends, preferential shareholders will also receive no extra bonuses.įurthermore, preference shareholders are eligible to receive their share of a company’s capital if the organisation winds up. Preferential shareholders have the right to receive dividends before an equity shareholder. These extra advantages are laid out clearly under Section 43(b) of the Companies Act (2013). As the name suggests, those who hold preference shares receive preferential treatment. Note that those who hold equity shares are eligible to vote at every organisation’s Annual General Meetings or AGMs. It is this risk-factor that many prospective shareholders cannot stomach. At times, they might even have to sell their shares at below-par values. However, if an organisation loses money, its equity shareholders have to bear the burden of losses. Plus, their shares will also have higher resale values. If a company’s shares are doing well on the Stock Exchange, shareholders will benefit as their company will pay extra dividends. They are:Ĭonsisting only of equity shares and sans preference shares, this class carries the maximum benefits and also maximum losses. There are two different classes of share capital. When a company is registered, its papers, including the Articles & Memorandum of Association, must reflect the total capital. When it comes to organisations, the terms ‘capital’ and ‘share capital’ are practically synonymous. The Companies Act (2013) has specific guidelines for all existing companies and the various ways they issue shares. Thus, the kinds of share capital became complicated. Promoters of large companies were also offered extra advantages.
They were rewarded with preferred shares. Since the ownership of an organisation also amounts to bearing responsibility, sharing day-to-day operations and passing around losses incurred, individual shareholders backed away. Shareholders were co-owners of a company whose shares they had bought.Īs businesses evolved, share capital types increased. When modern business structures first started, share capital and its types were limited and easy to understand. Keeping this in mind, the total capital collected by any organisation is its share capital, and its contributors are shareholders. When people voluntarily contribute money to an entity’s owned corpus, they automatically become co-owners of that entity. Remember that a company is an artificial person with its own legal identity. All organisations need a steady flow of capital to continue their expanding business. Simply out, share capital is the total sum raised by any organisation by issuing shares.