What are Shares & Its Types

A share is the interest of a shareholder in a company. The capital of a company is divided into certain invisible units of a fixed amount. These units are called shares.


Types of Shares

Under the companies Act 1956, a company can issue two types of shares viz. (1) Equity shares & (2) Preference shares


(1) Equity Shares

Equity shares with reference to any company limited by shares, are those which are not in preference. It is commonly referred to as ordinary share also represents the form of fractional or part ownership in which a shareholder, as a fractional owner, undertakes the maximum entrepreneurial risk associated with a business venture. 

The holders of such shares are members of the company and have voting rights.


(2) Preference Shares

Preference shares, with reference to any company limited by shares, are those which have two characteristics:

• They have a preferential right to be paid dividend during the lifetime of the company

• They have a preferential right to the return of capital when the company goes into liquidation.

Preference shares are of following kinds: 

• Cumulative preference shares. 

• Non-cumulative preference shares. 

• Participating preference shares. 

• Non-participating preference shares. 

• Convertible preference shares. 

• Non-convertible preference shares. 

• Redeemable preference shares.