Posted in: Legal/Finance in Andhra Pradesh | Posted: |
Disadvantages of equity shares
If only equity shares are issued, the company cannot take advantage of trading on equity. As equity capital cannot be redeemed, there is a danger of overcapitalization. Equity shareholders can put obstacles for management by manipulating and organizing themselves. During prosperous periods, higher dividends have to be paid to lead to an increase in the value of shares in the market, and it leads to speculation. Investors who desire to invest in safe securities with a fixed income have no attraction for such shares.