Class 12 Business Studies - ISC

Shares and Debentures

The chapter 'Shares and Debentures' is a core component of the Class 12 ISC Business Studies syllabus, focusing on how companies raise long-term capital from the public. It details the procedural, legal, and financial aspects of issuing equity shares, preference shares, and debentures. Students learn the distinction between owned funds and borrowed funds, the types of capital, and the rights of security holders. For board exams, mastering this chapter is crucial as it forms the theoretical foundation for corporate finance and links closely with company accounts, making it a high-scoring area for analytical and descriptive questions.

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Key Concepts

Units into which the total share capital of a company is divided, representing fractional ownership and giving the holder the right to a share of profits and voting power.

Debentures

A formal debt instrument issued by a company under its common seal, acknowledging a loan and containing a promise to repay the principal amount along with fixed interest.

Equity vs. Preference Shares

Equity shares carry variable dividends and voting rights with higher risk, whereas preference shares enjoy preferential rights regarding the payment of dividend and repayment of capital during liquidation.

Types of Debentures

Debentures are classified based on security (secured/mortgage vs. unsecured/naked), convertibility (convertible vs. non-convertible), redemption, and registration.

Oversubscription and Undersubscription

Oversubscription occurs when applications for more shares are received than offered, requiring pro-rata allotment or refunds, while undersubscription happens when applications are fewer than the minimum subscription required.

Important Formulas

Authorized Capital = Maximum amount of share capital a company is authorized to issue by its Memorandum of Association

Issued Capital = Nominal value of shares offered to the public for subscription

Subscribed Capital = Portion of issued capital that has been actually subscribed by the public

Called-up Capital = Amount of subscribed capital that the company has called upon shareholders to pay

Paid-up Capital = Actual amount of money paid or credited as paid-up by the shareholders

Board Exam Info

In the ISC Class 12 Business Studies examination, this chapter typically carries around 8 to 12 marks. Questions frequently appear as direct theoretical distinctions (e.g., Shares vs. Debentures), short notes on types of debentures, procedural steps for raising capital, and situational case studies regarding oversubscription or calls-in-arrears.

Frequently Asked Questions

What is the main difference between shares and debentures?

Shares represent ownership capital making the holder a part-owner with voting rights and fluctuating dividends, whereas debentures represent borrowed capital making the holder a creditor with a fixed rate of interest and no voting rights.

Can a company issue shares at a discount?

According to the Companies Act, companies generally cannot issue shares at a discount, except for sweat equity shares issued to directors or employees for intellectual property rights.

What happens if a shareholder fails to pay allotment or call money?

The unpaid amount is treated as 'Calls-in-Arrears'. If the shareholder still defaults after due notice, the company has the legal right to forfeit their shares and cancel their membership.

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