Preference shares resemble debt instruments because they offer pre-determined rate of dividend.
A company raises equity capital to meet its need for long-term funds for expansion or continuing operations of the company. Equity capital is not secured by the assets of the company.
Promoters are the group of investors who set up the company and bring in the initial capital required to start the business. This is the risk capital.
The company may allot shares to such investors through a private placement or preferential issue of shares.
When the equity shares are held by promoters and a few investors, it is said to be a closely held company.
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