What is equity share?

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Equity share also known as ordinary share, which means, other than preference share. Equity shareholder are the real owners of the company. They have a control over the management of the company. Equity shareholders are eligible to get dividends if the company earn profit. Equity share cannot be redeemed during the lifetime of the company. The liability of Equity shareholder is the value of unpaid value of share.

Feature of Equity share.

Maturity of share: Equity shares have permanent nature of capital. Which has no maturity period. It cannot be redeemed during the life time of the company.

Residual Claim on Income: If the company wound up, the ordinary or Equity shareholders have right to get the claims on assets these rights are available only for equity shareholders.

Right to control: Equity shareholders are the real owners of the company. Hence they have power to control the management of the company and they have power to take any decision regarding the business operation.

Voting Rights: Equity shareholders have voting rights in the meeting of the company with the help of voting right power; they can change or remove any decision of the business concern.

Pre-emptive right: Equity shareholders have pre-emptive rights. The pre-emptive right is the legal right of the existing shareholders. It is attested by the company in the first opportunity to purchase additional equity shares in proportion to their current holding capacity.

Limited Liabilities: Equity shareholding having only limited liabilities to the value of shares they have purchased. If the shareholders having fully paid up shares, they have no liabilities.

Advantage of equity shareholders

Permanent source of finance: Equity share capital is belonging to the long term permanent nature of sources of finance. Hence it can be used for long term fixed capital requirement of business concern.

Voting Rights: Equity shareholders have voting rights.

Retained earnings: when company have more share capital. It will be suitable for retained earnings which is the less cost sources of finance while compare to other sources of finance.


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