Thursday, 17 April 2014

12.6.8 Deferred or Founder's Shares



A pure private company can issue shares of a type other than those discussed above (s.90). Thus, it may issue what are known as deferred shares. As deferred shares are normally held by promoters and directors of the company, they are usually called founder's shares. They are usually of a smaller denomination, say one rupee each. However, they are generally given equal voting rights with equity share which may be of higher denomination, say Rs 10 each. As regard payment of dividend to holders of such shares, the articles
*  Now, companies are free to offer any percentage depending upon the market forces. usually provide that these shares will carry a dividend fixed in relation to the profits available after dividends have been declared on the preference and equity shares. Thus, the promoters, founders and directors have a very direct interest in the success of such a company; the greater the profits of the company the higher their dividends will be.

It is to be remembered, however, that as and when the private company converts  itself into a public company, it will have to alter its capital structure and retain only equity share c re capital and preference share capital (including CCPs), if any.

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