Share capital & debentures Kinds of share capital

A start-up founder in Powai gives her first engineer a slice of the company instead of a big salary, raises money from an investor who wants his money back with a fixed return, and borrows from a lender who wants security over the assets. Three people, three different deals, and each has a different name in company law: equity share, preference share, debenture. Chapter IV of the Companies Act 2013 is the rulebook for these instruments, and for what a company may and may not do with its own capital.

In two minutes

A limited company's share capital is equity (with voting or differential rights) or preference (s.43); shares are movable property (s.44); capital may be altered, issued further, bonus-issued, reduced or bought back only by the procedures and limits the Act sets; debentures are debt, not ownership (s.71).

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