A share refers to the units into which the total share capital of a company is divided. It represents a fractional part of the share capital and forms the basis of ownership interest in a company. The persons who contribute money through shares are called shareholders.

As per the Companies Act, 2013, a company can issue two main types of shares: preference shares and equity shares (also called ordinary shares). The classes of shares, along with their respective rights and obligations, are prescribed by the Articles of Association.

Preference shares are defined under Section 43 as shares that carry a preferential right to dividend. This dividend is paid as a fixed amount or at a fixed rate before any dividend is paid to equity shareholders. Additionally, they carry a preferential right to the repayment of capital on the winding up of the company. These shares can be participating or non-participating, cumulative or non-cumulative, and redeemable or irredeemable.

Equity shares are shares that are not preference shares. They do not enjoy any preferential right regarding the payment of dividend or the repayment of capital. Equity shareholders are entitled to share the distributable profits of the company after satisfying the dividend rights of preference shareholders. The dividend on equity shares is not fixed and may vary depending on the profits available.