Section 43 of the Companies Act, 2013
Section 43 of the Companies Act, 2013 defines the kinds of share capital that a company can issue.
📘 Section 43 – Kinds of Share Capital
Unless the articles of a company provide otherwise, the share capital of a company limited by shares shall be of two kinds:
1. Equity Share Capital:
Equity share capital is of two types:
(a) With Voting Rights
Shareholders have the right to vote on company matters.
One share usually equals one vote.
(b) With Differential Rights (as to dividend, voting, or otherwise)
Equity shares can have different rights than regular voting shares, such as:
Higher or lower dividends
Limited or no voting rights
Any other rights prescribed by the rules
Such differential rights must comply with rules prescribed by the Central Government, usually governed by Rule 4 of the Companies (Share Capital and Debentures) Rules, 2014.
2. Preference Share Capital:
Preference shareholders have the following preferential rights:
Dividend: Preference over equity shareholders in getting a fixed dividend.
Repayment of Capital: Preference over equity shareholders at the time of winding up.
🧾 Key Notes:
A company's Articles of Association (AoA) can override these default provisions.
Preference shareholders usually do not have voting rights, except in special circumstances (like if dividend is unpaid for 2+ years).
SEBI regulations apply to listed companies issuing shares with differential rights.
📌 Example:
A startup might issue equity shares with differential voting rights to the founders to retain control while raising capital.
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