Core concepts
- 01Kinds: equity (with/without DVR) and preference (cumulative/non-cumulative, participating, convertible).
- 02Issue at premium (Sec 52) — use restricted; issue at discount (Sec 53) generally prohibited.
- 03Bonus issue (Sec 63) from free reserves, securities premium, capital redemption reserve.
- 04Buy-back (Sec 68) — up to 25% of paid-up capital + free reserves in a year, max debt-equity 2:1.
- 05Debentures: secured/unsecured, convertible/non-convertible, redeemable/irredeemable.
Flowchart
Share Capital | Equity ---- Voting (basic / DVR) Preference - Cumulative/Non-cum, Particip., Conv. | Issues -- Public, Rights (Sec 62), Bonus (63), Pvt Placement (42), ESOP, Sweat Equity
Exam-critical pointers
- ⭐Sec 73 — acceptance of deposits regulated; private companies have specific exemptions.
- ⭐Preference shares max tenure 20 years; for infrastructure projects, 30 years (Sec 55).
- ⭐Sweat equity (Sec 54) — to directors/employees for know-how / IPR / value addition.
- ⭐ESOP discount on FV is treated as employee compensation expense in P&L.
Make it click