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CA Atul (Querist)
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02 January 2009 can any one suggest me what is the use of Equity, Preferance & Debenture shares in pvt. ltd. co. which one gives more benefit for company & how it issue in stock market...???

Ravikumar.G

Ravikumar.G (Expert)
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02 January 2009 Funds investing in Indian companies have the option of investing in equity shares,preference shares, debentures and other instruments, depending on the status of theportfolio company in India, i.e., whether it is a private limited, public unlisted or publiclisted company.While private limited companies may issue innovative instruments to suit the requirements ofinvestors, this may raise certain regulatory issues such as the need to seek the priorapproval of the government of India. Thus, most investors, even if investing in private limitedcompanies, prefer to subscribe to traditional instruments such as equity shares, preferenceshares, convertible debentures and warrants.While investing in equity shares is the simplest and most straightforward option, there areissues attached to investing in preference shares and other instruments such as debentures.For example, proceeds raised by the issuance of non-convertible and/ or optionally-convertible debentures and/or preference shares cannot be used for general corporatepurposes. Also, such instruments would need to have a minimum maturity period and a capon the coupon payable if they are to be issued without approval.While investing in preference shares would entitle investors to a preference upon a possibleliquidation and on dividends, it would not allow investors to vote on all matters relating to thecompany unless there are certain prescribed defaults. There is also a cap on the dividendpayable on preference shares

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