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162 Corporate Finance BRILLIANT’S

capital for a company. Equity capital represents AmoZa{en H¡${nQ>c Xem©Vr h¡ Š`m|{H$ BpŠdQ>r eo`ahmoëS>g©
ownership capital because equity shareholders gm_y{hH$ ê$n go H§$nZr Ho$ ñdm_r hmoVo h¢Ÿ& do AmoZa{en Ho$
collectively own the company. They enjoy the
cm^ Ho$ gmW-gmW Omo{I_ ^r CR>mVo h¢Ÿ& eo¶ahmoëS>g© H$mo
reward as well as bear the risk of ownership.
No promise is made to shareholders for a fixed {ZpíMV cm^m§e XoZo H$m dmXm Zht {H$`m OmVm h¡Ÿ&
dividend.
Equity share capital may be: BpŠdQ>r eo`a H¡${nQ>c {ZåZ àH$ma H$s hmo gH$Vr h¡…
(i) with equal rights or (i) g_mZ A{YH$mam| Ho$ gmW `m
(ii) with differential rights as to dividend, (ii) {S>{dS>oÝS>, dmoqQ>J Am¡a AÝ` {d{^ÝZ A{YH$mam| Ho$
voting and otherwise. gmWŸ&
This has been permitted after an H$ånZr EŠQ>, 2000 Ho$ g§emoYZ Ho$ ~mX BgH$s
amendment to the Companies Act in 2000. AZw_{V Xr JB©Ÿ& BgHo$ nyd© npãcH$ H$ån{Z`m| H$mo {d{^ÝZ
Prior to this, public companies were not
allowed to issue equity shares with differential A{YH$mam| dmco BpŠdQ>r eo`g© Bew H$aZo H$s AZw_{V
rights. Zht WrŸ&
Equity shares represent the owner’s BpŠdQ>r eo`g©, ñdm_r H$s BpŠdQ>r Xem©Vo h¢Ÿ& AÝ`
equity. In other words, they are known as the eãXm| _|, BÝh| H$ånZr Ho$ d¡Ym{ZH$ ñdm_r Ho$ Zm_ go OmZm
legal owners of the company. The holders of
OmVm h¡Ÿ& BpŠdQ>r eo`g© Ho$ hmoëS>g© Ho$ H$ånZr H$s Am`
equity shares have unrestricted claim on
Am¡a g§n{Îm`m| na Agr{_V A{YH$ma hmoVo h¢Ÿ& CZH$s H$ånZr
income and assets of the company. They possess
voting power in the company. _| dmoqQ>J nm°da hmoVr h¡Ÿ&
Features of Equity Shares BpŠdQ>r eo`g© H$s {deofVmE±
There are many important features of gm_mÝ` (BpŠdQ>r) eo`g© H$s H$B© {deofVmE± hmoVr h¡
ordinary (equity) shares which distinguish it Omo BÝh| AÝ` eo`g© go AcJ H$aVr h¢…
from other shares:
1. Right to control: Ordinary sharehold- 1. {Z`§ÌU H$m A{YH$ma… gm_mÝ` eo¶ahmoëS>g© H$mo
ers have right to manage and control the com- H$ånZr H$m à~§Y H$aZo Am¡a {Z`§{ÌV H$aZo
pany. The company's major poli- H$m A{YH$ma hmoVm h¡Ÿ& H§$nZr H$s à_wI
Features of Equity
cies and decisions are approved
Shares Zr{V`m± Am¡a {ZU©`, ~moS>© Am°\$ S>m`aoŠQ>g©
by the board of directors, while Ûmam {cE OmVo h¢ O~{H$ {Z`{_V
day-to-day operations are carried 1. Right to control
2. Voting rights H$m`©{d{Y`m±, H§$nZr Ûmam {Z`wŠV {H$E JE
out by managers appointed by
3. Claim on income _¡ZoOg© Ûmam {cE OmVo h¢Ÿ& Bg àH$ma {Z`§ÌU
the board. Thus control may be
4. Claim of assets H$mo S>m`aoŠQ>g© H$s {Z`wpŠV Ho$ A{YH$ma Ho$
defined as the power to appoint
5. Limited liability ê$n _| n[a^m{fV {H$`m Om gH$Vm h¡Ÿ&
directors. Ordinary shareholders
6. Pre-emptive rights
have the legal power to elect di- gm_mÝ` eo¶ahmoëS>g© H$mo ~moS>© Ho$ S>m`aoŠQ>g©
7. Primary risk bearer
rectors of the board. If the board H$mo MwZZo H$m H$mZyZr A{YH$ma hmoVm h¡Ÿ&
8. Enjoy high profits
fails to protect their interests, 9. Base for raising loans `{X ~moS>© CZHo$ {hVm| H$m Ü`mZ aI nmZo _|
they can replace directors. Ordi- 10. Non-Redeemable Ag\$c hmo Vmo do S>m`aoŠQ>g© H$mo ~Xc
nary shareholders are able to con- 11. Real owner gH$Vo h¢Ÿ& gm_mÝ` eo¶ahmoëS>g©, H§$nZr Ho$