What is a Company?
Company is a form of Business Organization. It is a voluntary association of two or more persons formed for carrying on some business, obviously to earn profit, which comes into existence only after it is registered or incorporated or recognized by the law.

The money that a company raises for starting and running its business is called “Capital”. Initially the capital in the form of money is contributed by each member. This is known as “Equity Capital” of the company. Each member ' s contribution represents his or her “share” in the owne r ship of the company. Companies also raise capital from banks and other financial institutions.

There are two types of companies- Private limited Companies and Public Limited Companies. The former ends its name with ‘Private Limited’, while the later with only ‘Limited’. When we talk of investment in shares, we preferably talk about Public Limited companies.

Rights and Liabilities of the shareholders Having been recognized by the law, it possesses a personality of its own. It can do business like a person. It can buy, sell or own properties without involving any shareholders.

Liability of the members of a company is usually limited to a value of the shares subscribed by them or to the amount of guarantee given by them. Becoming a shareholder of a company does not give him the right to manage the affairs of the company.

As company has the identity of its own, it is not affected by the changes in owners. Each share has the same value and can be transferred from one person to another.

Particulars of Members
It is obligatory for every company to maintain a register of members, where all the relevant particulars of every shareholders, like names, addresses and other important facts are recorded.

Preference Shares and Equity Shares
Preference shares and equity shares are two categories of shares. Preference shares give a fixed rate of dividend. Preference shareholders have a right to receive dividends as well as repayment of capital in any case, even when the company is winding up. This is an additional security to preference shareholders.

On the other hand, Equity shareholders can not claim dividends as a matter of right. As Equity shareholders are the owners of the company, they receive profits after all the obligations towards its preference shareholder and creditors have been paid. When a company makes large profits, the major part goes to its Equity shareholders. As well as, when there is a loss, it is the Equity shareholders who have to bear.

In an expanding company, an Equity shareholder gets more benefits as compared to the Preference shareholder. The former receive capital appreciation, plus dividend, while the later gets only his fixed rate of dividends.

Rights Shares
Whenever a company requires an additional funds to meet their needs, or for the i r expans ion and diversification, it sell the additional Equity shares on a “Right Basis” to its shareholders. Such shares are called“Right Shares”. The number of rights shares offered to each shareholder is directly proportionate to the number of Equity shares he owns.

Bonus Shares
When a company finds that their equity capital is too small, as compared to the expanded size of their business operations, Bonus shares are issued free to existing shareholders in proportion to the number of shares held by them.

Shivani
MS (Communication)