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CS Executive · Company Law and Practice · Share and Share Capital - Concepts

Zenith Agro Ltd, a company limited by shares, has issued only two types of shares: shares carrying a fixed 8% dividend with priority in repayment on winding up, and all other shares. Under the definition in the Companies Act, 2013, how is the 'equity share capital' of the company determined?

Equity share capital of a company limited by shares means all share capital that is not preference share capital. It is a residual definition, so it includes shares with voting rights as well as shares with differential rights, and is not tied to who holds them.

  1. AAll share capital that is not preference share capitalCorrect
  2. BOnly share capital carrying voting rights on every resolution
  3. COnly share capital issued to promoters of the company
  4. DOnly share capital carrying no right to any dividend

Explanation

The Act defines equity share capital of a company limited by shares as all share capital which is not preference share capital. It is not limited to voting shares, because equity may also carry differential rights. Option on 'only voting rights' is wrong because equity can have differential rights as to dividend, voting or otherwise.

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