Amended and updated notes on section 43 of Companies Act 2013. Detail discussion on provisions and rules related to kinds of share capital.
Chapter IV (Sections 43–72) of the Companies Act, 2013 (CA 2013) deals with the provisions related to share capital and debentures. Section 43 of CA 2013 provides for kinds of share capital.
Recently, we have discussed in detail section 42 (Issue of shares on private placement basis) of CA 2013. Today, we learn the provisions of section 43 of Companies Act 2013 read with the Companies (Share Capital and Debentures) Rules, 2014.
Section 43 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 902(E) issued dated 27.03.2014. This notification was come into force from 1st April, 2014 i.e. the commencement date of section 43 is 1-4-2014.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | IV |
| Chapter Name | Share Capital and Debentures |
| Section No. | 43 |
| Section Name | Kinds of share capital |
| Monthly Updated Edition | Company Law PDF |
Section 43 of Companies Act 2013: Kinds of share capital
Section 43 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.
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.
Explanation: For the purposes of this section, —
- (i) ‘‘equity share capital’’, with reference to any company limited by shares, means all share capital which is not preference share capital;
- (ii) ‘‘preference share capital’’, with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to—
- (a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income-tax; and
- (b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company;
- (iii) capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely: —
- (a) that in respect of dividends, in addition to the preferential rights to the amounts specified in sub-clause (a) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid;
- (b) that in respect of capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in sub-clause (b) of clause ( ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.
Exception/ Modification/ Adaptation:
1) In case of Private company section 43 shall not apply where memorandum or articles of association of the private company so provides. –Notification No. G.S.R. 464(E) dated 5th June, 2015.
2) Section 43 shall not apply to a Specified IFSC public company, where memorandum of association or articles of association of such company provides for it. –Notification No. G.S.R. 08(E) dated 4th January, 2017.