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Why This Activity??

195 views 1 replies

MPR Sanjay Kumar

3145 Points Posted on 18 August 2022

dear Chartered Accountants,

the company issuing shares to shareholders to increase the raise of capital fund... my question is why the companies are buyback its shares from shareholders what is the benefit of that??

Query no 1: preference shareholder and equity share holder difference

Query no 2: while liquidation of companies which shareholder liability of companies debt??

please clarify this situations activities and Company

Replies (1)

prasad Nilugal

GST Practitioner & Accounts

15093 Points Posted on 19 August 2022

Company Buy back it's shares for
1) To Increase the value of shares
2) To Increase the value of EPS
3) To reduce excess share Capital
4) To utilise excess Cash lying idle in the Business etc are main reasons.

2) Difference between Equity shares holder
and preference shares holder

a) Equity shares holder are owner of the company, preference shares holder are not.

b) Preference shares are redeemed after some period time, Equity shares are not .

c) Equity shares holder has voting rights, preference shares holder do not have Voting rights,( limited rights)

d) Winding up of Company, preference shares holder are paid first.

e) preference shares holder received dividend only after Equity shares holder.

f,) Equity shares holder are eligible for Bonus shares. preference shares holder are not.

g) Long term investment for Equity shares holder, Midium term investment for preference shares holder.

3. preference shares holder are first to be paid while liquidation of Company.