Question

What is meant by a 'Share'? Given any two difference between 'Preference Shares' and 'Equity Shares'.

Answer 1

Shares, as applied to the capital of a company, refer to the units into which the total share capital of a company is divided. Thus, a share is a fractional part of the share capital and forms the basis of ownership interest in a company. The persons who contribute money through shares are called shareholders.

As per Section 86 of The Companies Act, a company can issue two types of shares (1) preference shares, and (2) equity shares (also called ordinary shares).

Preference share holder gets fixed dividend whereas equity share holder get dividend as per profit and loss of company.

Preference share are redeemable whereas equity shares are not redeemable.