CHARACTERISTICS OF EQUITY SHARES

Promoters: The initial investors who set up the company and provide risk capital. They typically retain majority shareholding to maintain control.
Institutional Investors: Professional investors, such as financial institutions, venture capital companies, and mutual funds, who evaluate business propositions and invest in companies.
Public Investors: Investors who buy equity shares when a company offers them to the public through an Initial Public Offering (IPO). They may include retail investors, high net worth individuals, and institutional investors.

Ownership Rights: Shareholders have voting rights and can participate in the company's decision-making process.
Right to Dividend: Shareholders are entitled to receive dividends, which are a portion of the company's profits.
Ownership Transfer Rights: Shareholders can sell their shares to other investors.
Other Rights: Shareholders have the right to inspect company documents, seek legal recourse, and may be granted special rights such as anti-dilution rights.

No Fixed Return: Dividends are not guaranteed, and the value of shares can fluctuate.
No Fixed Tenor: Equity shares are issued for perpetuity, and investors may not get their principal amount back.
Liquidity Risk: Shareholders may not be able to sell their shares at a fair price or may face difficulties in finding a buyer.
No Collateral Security: Equity capital is not secured by the company's assets, and shareholders' claims rank last in order of preference.

Face Value: The book value of a share, which remains fixed and is used to calculate dividend payouts.
Share Premium: The excess amount received by the company over the face value when issuing shares.
Authorised Capital: The maximum amount of equity capital a company can have, as defined in its Memorandum of Association.
Issued Capital: The portion of authorised capital that has been issued to investors.
Paid-up Capital: The amount of capital that investors have paid to the company when subscribing to its shares.

CHARACTERISTICS OF EQUITY SHARES (Part 2)

Paid-up Capital: The portion of the issued capital that has been fully paid-up by the shareholders.
Outstanding Shares: The total number of shares issued by the company to its investors.
Key points to remember:
- Paid up capital is always less than or equal to issued capital.
- Issued capital is always less than or equal to authorised capital.
- Authorised capital is the maximum amount that can be issued or paid up.

Fully Paid-up Shares: Shares where the entire face value amount is collected from shareholders upfront.
Partly Paid-up Shares: Shares where the entire face value amount is not collected from shareholders upfront, and the company can make a call for the balance unpaid portion.
Key points to remember:
- Shareholders of partly paid-up shares are liable to pay the call money if the company makes a call.
- If the shareholder does not pay the call money, the shares can be forfeited.

Corporate Actions: Events initiated by a public company that bring actual changes to the securities issued by the company.
Types of corporate actions:
- Dividend: Payment of a portion of the company's profit to the shareholders.
- Buyback of Shares: Repurchase of shares by the company from its existing shareholders.
- Bonus Issue: Issue of additional shares to existing shareholders without any capital contribution.
- Stock Split and Consolidation: Change in the face value of shares, which can increase or decrease the number of outstanding shares.

Reduction of Share Capital: A company may reduce its share capital through:
- Extinguishment of shares through buyback.
- Forfeiture of shares in case of partly paid shares.
The proposed reduction in capital must be approved by a special resolution passed by the company.

Preference Shares: Shares that offer certain special features or benefits to the investor, such as:
- Fixed rate dividend.
- Preference over equity shares in payment of dividends and repayment of capital.
Types of preference shares:
- Cumulative Preference Shares: Unpaid dividends are carried forward to the next year.
- Participating Preference Shares: Shareholders participate in the residual profits of the company.

Rights Issue: An issue of shares to existing shareholders, who have a right to proportionate participation in the capital raising activity.
Preferential Issue: An issue of shares to a strategic investor or collaborator at a pre-negotiated price, which dilutes the proportionate rights of existing shareholders.

Statement: Preference shareholders get preference over debenture holders in the payment of dividend.
Answer: FALSE, as preference shareholders get preference over equity shareholders, but debenture holders have a higher claim than preference shareholders in the event of liquidation.

Definition: Corporate actions refer to events initiated by a company that affect its shareholders.
Examples:
- Dividend: Distribution of a portion of the company's profit to its shareholders.
- Bonus issue: Issue of additional shares to existing shareholders without any capital contribution.
- Stock split: Division of existing shares into a larger number of shares to increase liquidity.
Answer: d. All the options given, as all these options are examples of corporate actions.

Definition: A company may issue additional shares to existing shareholders without any capital contribution from the shareholders based on the number of shares an investor holds.
Term: This is known as a Rights issue or Bonus issue. However, the correct term in this context is Bonus issue, as it specifically refers to the issue of additional shares to existing shareholders without any capital contribution.
Answer: a. Bonus issue