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EQUITY ORDINARY SHARES

INTRODUCTION

Equity/ordinary share capital, as a long-term source of finance, represents ownership capital/securities and its owners to equity-holders/ordinary shareholders share the reward and risk associated with the ownership of corporate enterprises. It is also called ordinary share capital in contrast with preference share capital which carries certain preferences/prior rights in regard to income and redemption. When a company is formed, it first issues equity shares to the promoters. As the need for financing increases, the company may issue ordinary shares to specific and small number privately to promoters relatives, friends, business associates, employees, financial institutions, mutual funds, venture capital funds and so on. As the company grows further, it raises capital from the public. The first issue of equity shares to the public by an unlisted company is called the Initial public offering (PO). Subsequent offerings are called further issues/offerings. This chapter discusses the ordinary/equity shares. Section 1 of the chapter describes their fundamentals in terms of (1) types, (2) features/attributes and (3) evaluation. The procedure involved in issuing them to the public is the focus of Section 2. The main points are summarized in the last Section.

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