Solution
Section 43 of the Companies Act, 2013 defines and describes Equity Shares and Preference Shares.
Understanding Section 43
This section is titled "Kinds of Share Capital" and categorizes the share capital that a company can issue into two types:
1. Equity Share Capital
Share capital that is not preference share capital. It represents ownership in the company with voting rights and residual claim on profits.
2. Preference Share Capital
Share capital with preferential rights regarding:
- Dividend: Fixed rate of dividend paid before equity shareholders
- Repayment of capital: Priority in repayment during winding up of the company
Why Other Options are Incorrect
- Section 40: Deals with the payment of dividends
- Section 41: Relates to the power of a company to alter share capital
- Section 42: Deals with the issue and allotment of securities on private placement
Correct Answer: Option 4 (Section 43)