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Sterling Institute of Management

Studies

Shares and Shares Capital

Presented By

MAYUR ANTRE 63

KANTILAL KAMBLE 96

SHIVKUMAR SHARMA 98

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SHARES

y What is Share?

In finance, a share is a unit of account for various

financial instruments including stocks, mutual funds,

limited partnerships, and REIT's.

y Allotment of Shares

The application for shares by intending shareholdersis an offer for the purchase of shares and when accepted

by the company is known as allotment of shares.

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Provisions of the Companies Act

Companies Act 1956 : Allotment of Shares by Public

Companies.

I. Registration and issue of Prospectus Sec{60}

II. Minimum Subscription Sec {69(1)}III. Application Money Sec {69(3)}

IV. Money to be Deposited in the scheduled bank Sec {69(4)}

V. Opening of subscription list {72(1)(2)}

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VI. Statement in the lieu of a prospectus to be

delivered to the registrar.

VII. Compulsory Listing of all public issues.

VIII. Initial offer of securities to be in the demat formin certain cases.

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Irregular Allotmenty An allotment is irregular when it has been made by a

public company which has issued a prospectus with out

receiving at least five percent of the nominal value of

shares as application money or without receiving the

minimum subscription or without depositing theapplication money in the scheduled bank.

y When it has been made by a public company which has

not issued any prospectus without filing a statement inlieu of prospectus at least three days before the first

allotment of shares.

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Return as to Allotmenty Whenever a company having a share capital makes any

allotment of its shares, the company shall, within [thirty

days] thereafter.

y a) file with the Registrar a return of the allotments,

stating the number and nominal amount of the shares

comprised in the allotment, the names, addresses and

occupations of the allotees, and the amount, if any, paid

or due and payable on each share:

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b) in the case of shares (not being bonus shares) allotted as

fully or partly paid up otherwise than in cash, produce for

the inspection and examination of the Registrar a contract inwriting constituting the title of the allottee to the allotment

together with any contract of sale, or a contract for services

or other consideration in respect of which that allotment

was made, such contracts being duly stamped, and file withthe Registrar copies verified in the prescribed manner of all

such contracts and a return stating the number and nominal

amount of shares so allotted the extent to which they are to

be treated as paid up, and the consideration for which they

have been allotted

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Issues share at a DiscountAccording to Section 79 of the companies act

y The issues of shares at a discount must be a class of shares

already issued.

y At least one year should have elapsed at the date of the issue

form the date of commencement of business by the company.

y The issue is authorized by a resolution in the general

meeting, which must state the maximum rate of discount.

y It is sanctioned by the Company law Board.

yShares are issued within two months of the date on which theissue is sanctioned by the company law board or within such

extended time as the company law board may allow.

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Share Certificatey A share certificate is a certificate issued by the company

under its common seal, specifying the number of shares

held by any member and the amount paid on each share.

It is prima facie evidence of the title of the member to

such shares. A share certificate is a declaration by thecompany that the person in whose name the certificate

is made out and to whom it is given, is a shareholder in

the company and the certificate is given by the company

with the intention that it shall be used by the person to

whom it is given and acted upon in the sale and transfer

of shares.

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Contents of a Share Certificatey Name and address of the registered office of the company.

y Serial number of the share certificate.

y Date of issue of the certificate.

y Name and address of the shareholder.

y Number and class of shares.

y Distinctive numbers of shares included in the share

certificate.

y Nominal value of each share.

y Amount paid on each share.

y Impression of the common seal of the company.

y Space for the signature of two directors and the secretary.

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Legal Effects ofShare Certificate

y Estoppel as to title to the shares.

y Estoppel as to payment.

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STOCKy Stock is aggregate of fully paid up shares legally consolidated.

y Can be split into fractions of any value.

yShareholder can transfer any portion of stock as he likes.

y It is also treated as proof for Fully Paid Up shares.

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CONDITIONS

y Statutory condition or creating stock (94-1)

y Conversion of shares into stock (96)

y Reconversion of stock into hares (95-1)

y Rights and privileges of holder of stocks (38)

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DIFFERENCEAMONGSHARE & STOCK

Shares Stock

y Partly or Fully paid up shares.

y Cant issue to public directly.

y It has nominal value.

y Are of Equal denomination.

y Shares are numbered

consecutively.

y Cant be transferred into

fractions.

y Only fully paid up shares.

y Can be issued directly.

y Stock has none.

y It can be split into fractions of any

amount.

y Stock is not numbered but named

with shareholder.

y Can be transferred into fractions.

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CALLSONSHARESC

all of shares is a demand by the company in pursuance of resolution of the board of directors and in accordance with the

regulation of article upon its share holders, to pay the whole or part

of the balance remaining unpaid on their shares during the lifetime

of the company.

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REQUISITESOF VALID CALL

y Resolution of Board of Directors.

y The amount and time of payment.

y Calls of the same class to be made on uniform basis.

y Accordance with provisions of AOA.

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TYPESOF CALLSy Calls in Arrears:

y If payment on call is not made on or before the due date, then

shareholder needs to pay fixed payment plus interest from due date.

y Calls in advance:

y If shareholder is willing to pay his payment of shares in advance without

any call which can be fully or partly then company can accept it.

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FORFEITUREOFSHARESy

It means a compulsory termination of membership and taking awaythe shares from a member by way of penalty.

y Directors have no direct right to Forfeit the shares but if mentioned

in the AOA.

y This must be pursued with great exactness which is agenda, quorum,

minutes of meeting, proper appointment of director.

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ESSENTIALSOF VALID FORFEITURE

y For non payment of shares.

y Notice of Forfeiture

y Resolution of Forfeiture

y Bonafide reasons

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y Effects of Forfeiture:

y C

eases membership.y Loses all rights and interests in his shares.

y Loses money earlier paid.

y Doesnt relieve shareholder from liability.

y Reissue of Forfeited shares:

y Can be sold out to other person.

y C

an be disposed off.

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SURRENDEROFSHARES

y When shareholder abandons his shares in favour of the company.

y Director has power and right to accept the surrender the share.

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Share capital

y In a simple words the term capital denotes a particularamount of money with which a business is started.

y Funds raised by issuing shares in return for cash orother considerations. The amount of share capital acompany can change over time because each time abusiness sells new shares to the public in exchange for

cash, the amount of share capital will increase.

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Capital of a company

(1)Nominal or registered capital: this is the maximum amount

which a company is authorized to raise by issue of shares upon

which it pays the stamp duty and registration fee.

(2)Issued capital: such part of the registered capital that is offered

to the public for subscription is called the issued capital of thecompany.

(3)Subscribed capital: this refers to that part of the company's

issued capital which has been taken up or subscribed by the

public .

(4)Reserve capital :it is apart of the authorized capital of a firmthat has not been called up and is, therefore, available for drawing

in case of a need.

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Share

y Certificate representing one unit of ownership in a corporation,

mutual fund, or limited partnership is called share.

yA share is the interest of a shareholder in the company measuredby a sum of money .

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Kinds of shares

(a). Preference shares: A preference share is similar to anordinary share but carries certain preferential rights. These rights

usually concern the guarantee of a fixed return to the shareholder

or a guaranteed return on the investment.

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Characteristics of preference shares

(1). The dividend on them is fixed by the articles of the

company;

(2). Preference share holder will get their fixed rate of

dividend before any dividend is distributed among theother class of shareholders.

(3). At the time of winding up the company these

shareholders must be paid back their capital before

anything is paid to ordinary shareholders.

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Ordinary or equity shares

Shares having a claim to participate in the whole range of annual

profits remaining to a company after it has satisfied all charges

and met any fixed preferential dividends, and having a right to

participate in surplus assets in a winding-up.

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Voting rights

y Shareholders have the right to vote on major policy

issues. Usually, a shareholder is given one vote for

each share of common stock that he or she owns.

However, some companies issue different classes ofshares, and some classes have extra voting rights. ...

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The voting right of different types of shares

y Equity share with voting rights: the holders of such equity

shares have normal voting rights on every resolution placed

before the company at any general resolution place before the

company at any general meeting .

y Equity shares with deferential rights: the holders of such

equity shares shall have differential rights as to dividend,

voting or otherwise in accordance with such rules and subject .

y Voting rights of such preference shareholders : a preference

shareholder of a company will have the right to vote onresolutions which directly affect his rights.

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