According to The Companies Act, a company can issue two primary types of shares:
Preference Shares: These are shares that come with certain preferential rights compared to ordinary equity shares. Preference shareholders typically have a fixed dividend rate, and they are paid dividends before equity shareholders. In case of liquidation or winding up, preference shareholders usually have a higher claim on the company's assets compared to equity shareholders. However, preference shareholders often have limited or no voting rights.
Equity Shares (Ordinary Shares): These are the most common type of shares issued by companies. Equity shareholders have ownership in the company and are entitled to a share of the company's profits. They also have voting rights in company decisions, which is proportionate to the number of shares they hold. Unlike preference shareholders, equity shareholders do not have a fixed dividend rate, and their dividends depend on the company's profitability and dividend policies. |
