Kinds of share capital
Section 43 of the Companies Act, 2013 deals with kinds of share capital. The share capital of a company limited by shares shall be of two kinds, namely:-- (a) equity share capital-- (i) with voting rights; The Act came into force on 01 Apr 2014.
The share capital of a company limited by shares shall be of two kinds, namely:--
(a) equity share capital--
(i) with voting rights; or
(ii) with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed; and
(b) preference share capital:
Provided that nothing contained in this Act shall affect the rights of the preference shareholders who are entitled to participate in the proceeds of winding up before the commencement of this Act.
Explanation.-- For the purposes of this section,--
(i) equity share capital, with reference to any company limited by shares, means all share capital which is not preference share capital;
(ii) preference share capital, with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to
(a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income-tax; and
(b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company;
(iii) capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely:--
(a) that in respect of dividends, in addition to the preferential rights to the amounts specified in sub-clause (a) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid;
(b) that in respect of capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in sub-clause (b) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.
Section 43, The Companies Act, 2013 (Act 18 of 2013).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Referred to by 1
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Teq Green Power Xiii Private Limited vs Remc Limited
Court's Decision & Legal Precedent
Setting out section 43 in full, the Division Bench held that the share capital of a company limited by shares is of two kinds only, equity share capital and preference share capital, so that preference share capital is part of the company's paid-up share capital and therefore part of its 'net worth' as defined in section 2(57); read with section 55, preference shares redeemable only at the option of the issuer and carrying no fixed tenure are not a debt or liability, since they can be redeemed only out of profits or the proceeds of a fresh issue and never out of existing share capital. A tender condition requiring net worth to be computed 'in accordance with the Companies Act, 2013' could not be applied so as to exclude preference shares, and the exclusion was struck down as arbitrary and contrary to the statute.
On this section: The judgment construes section 43 and its Explanations directly, using the two-fold classification of share capital in that section to decide that preference share capital counts towards paid-up share capital and hence towards statutory net worth.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Made under this section, and citing it
2 instruments state that it was made under this provision — the power to make it comes from here, so a change to any of them changes what this section requires in practice. Newest first.
Another 1 instrument names this provision in its title or its text without being made under it.
Questions about Section 43
What have the courts held on Section 43 of the Companies Act?
Teq Green Power Xiii Private Limited vs Remc Limited (21 Mar 2023) is the leading judgment on this section among those set out below: The judgment construes section 43 and its Explanations directly, using the two-fold classification of share capital in that section to decide that preference share capital counts towards paid-up share capital and hence towards statutory net worth.
How do I find court cases under Section 43 of the Companies Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Companies Act 43, section 43 Companies Act, section 43 of the Companies Act. People searching for it also type companies act regulation 43. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with Teq Green Power Xiii Private Limited vs Remc Limited (21 Mar 2023).
What should I read with Section 43 of the Companies Act, and has it changed?
1 other provision in this corpus refers back to it. The rules and notifications made under it are where it actually bites, and there are 2: most recently Chapter IV - The Companies (Share Capital and Debentures) Rules, 2014 (2014), then The Companies (Share capital and Debentures) Amendment Rules, 2014 (2014).
When did Section 43 of the Companies Act come into force?
Section 43 of the Companies Act, cited as Companies Act 43, came into force on 01 Apr 2014, having been enacted on 29 Aug 2013. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions5089 words
- 143. Powers and duties of auditors and auditing standards1867 words
- 230. Power to compromise or make arrangements with creditors and members1432 words
- 232. Merger and amalgamation of companies1416 words
- 149. Company to have Board of Directors1403 words
- 217. Procedure, powers, etc., of inspectors1390 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.