# Share Capital — Meaning and Kinds [Section 43]

## 1. What is a Share?

Section 2(84) defines a share as:

> A share in the share capital of a company and includes stock.

### Conceptual Breakdown

The total capital of a company is called share capital.
This share capital is divided into units of a certain face value (e.g., ₹10 each).
Each such unit is a share.
A shareholder is thus a fractional owner of the company's capital, with rights proportional to the shares held.

## 2. Share vs Stock

While the definition includes 'stock,' the two are technically distinct:

Shares are issued in specified numbered units (e.g., 100 shares of ₹10 each).
Stock is consolidated paid-up share capital, expressed in money value and divisible into any fraction. (Note: Under the 2013 Act, conversion of shares into stock is no longer permitted.)

## 3. Kinds of Share Capital [Section 43]

A company limited by shares can have two broad kinds of share capital:

```

Share Capital

-----------------|-----------------

| |

Equity Share Capital Preference Share Capital

----|----

| |

With With differential

voting rights as to dividend,

rights voting or otherwise

```

### A. Equity Share Capital

Further divided into:

1. Equity with normal voting rights — sometimes called plain vanilla equity because the voting rights are equitable/equal.

2. Equity with differential rights (DVR) — these may differ as to:

Dividend, or
Voting rights, or
Otherwise.

Governed by Rule 4 of the Companies (Share Capital and Debentures) Rules, 2014.

### B. Preference Share Capital

Carries preferential rights with respect to:

Payment of dividend, AND
Repayment of capital at the time of winding up.

## 4. Statutory Scope

Chapter IV consists of Sections 43 to 72, supplemented by the Companies (Share Capital and Debentures) Rules, 2014.

Worked example

### Example 1

Example — Identifying Kind of Capital:

A company has issued the following:

(a) 1,00,000 shares of ₹10 each with normal voting rights;

(b) 50,000 shares of ₹10 each carrying 1/10th voting rights but extra dividend;

Classification:

(a) Equity share capital with voting rights.
(b) Equity share capital with differential rights (DVR).
(c) Preference share capital.

⚠️ Common exam mistakes

Treating equity DVR shares as a third independent kind of capital. They are a sub-category of equity, not a separate class.
Confusing 'stock' with US-style common stock. Under the Indian Companies Act, 'stock' merely refers to consolidated paid-up share capital — a now-defunct concept.
Forgetting that the definition of 'share' under Section 2(84) expressly includes stock.

Bare-Act text Section 2(84) and Section 43 · Companies Act, 2013 · click to expand

Section 2(84): 'share' means a share in the share capital of a company and includes stock. Section 43: The share capital of a company limited by shares shall be of two kinds, namely:— (a) equity share capital— (i) with voting rights; or (ii) with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed; and (b) preference share capital: Provided that nothing contained in this Act shall affect the rights of the preference shareholders who are entitled to participate in the proceeds of winding up before the commencement of this Act.

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Meaning of Share and Kinds of Share Capital (Section 43)

Worked example

⚠️ Common exam mistakes