Description
information about share, share capital and debenture. It describes different types of shares. It also explains buyback of shares.
DEFINITION OF SHARES
The capital of a company is divided into certain indivisible units of a fixed amount. These units are called shares. It may be defined as “interest in the company entitling the owner thereof to receive proportionate parts of profits, if any, and of a proportionate part of the assets of the company upon liquidation.”
MEANING OF STOCKS
Aggregate of fully paid-up shares, consolidated and divided, for the convenient holding into different parts. It may be transferred or split up into fraction of any amount, without regard to the original face value of share.
Share
Has nominal value
May not be fully paid up Transferrable in round numbers
Stock
Has no nominal value
Always fully paid up Transferrable in fractions
Can be issued directly
Cannot be issued directly
Has a distinctive number
All shares of class are of equal nominations
No such number
May be different denominations
TYPES OF SHARES
Preference share
Equity share
Sweat equity
With differential rights as to dividend, voting or otherwise
With voting rights
PREFERENCE SHARES
(Characteristics)???
They have preferential rights to be paid dividend during the life time of company;
They have preferential right to the return of capital when the company goes into liquidation [sec.85(1)]
TYPES OF PREFERENCE SHARES
Cumulative/ Non-Cumulative
Participating/ Non Participating
Convertible/ Non-Convertible
Redeemable/ Irredeemable
Share Warrant Issued only by public cos Provision in articles and approval from central govt. Only for fully paid up shares Holder is not a member of a company ,unless the articles so provide. Transferred by mere delivery. No registration is necessary. No stamp duty payable on transfer By usage a negotiable instrument Does not constitute share qualification of a director
Share Certificates Issued only by public and private cos It is a statutory obligations and none is necessary For all shares He is a member
For transfer of shares,registration is necessary. Stamp duty is payable on transfer of shares Not so directed It does
Holder cannot present a petition for winding up.
Dividend is paid to the holder of a share certificate by the issue of a dividend warrant
Holder can present such a petition
Dividend is payable to the holder of share warrant on the presentations of the relevant coupon attached to the share warrant
PROVISION OF SHARE TRANSFER
Proper Instrument
Validity of Instrument
Appeal against refusal to
Register
Forged Under Depository System
Refusal
Transfer
of Transfer
OTHER PROVISIONS ABOUT SHARES
FORFEITURE
TRANSMISSION OF SHARES
ISSUE OF SHARES AT DISCOUNT (UPTO 10%)???
ISSUE OF SHARES FOR OTHER CONSIDERATIONS (SEC.75)???
CLASSIFICATION OF SHARE CAPITAL BASED ON USAGE
NOMINAL, AUTHORISED, REGISTERED CAPITAL ISSUED CAPITAL SUBSCRIBED CAPITAL CALLED-UP CAPITAL PAID-UP
KINDS OF SHARE CAPITAL (SEC. 86)???
PREFERENCE SHARE CAPITAL [SEC. 85 (1)]
EQUITY SHARE CAPITAL [SEC. 85(2)]
ALTERATION OF CAPITAL ( Sec.94)???
Increase
Consolidation
Conversion
Sub-Division
Cancellation
REDUCTION OF CAPITAL
(SUBJECT TO CONFIRMATION BY TRIBUNAL)???
REDUCTION OF LIABILITY [SEC.100(1)(a)]
CANCELLATION OF PAID-UP SHARE CAPITAL (LOST) SEC.100(1)(b)1
PAYING OFF PAID-UP SHARE CAPITAL (EXCESS)??? SEC.100(1)C
RESTRICTION ON PURCHASE OF ITS OWN SHARES BY A COMPANY
Section 77(1) of the Company’s Act provides that a company limited by shares or a company limited by guarantee having a share capital cannot buy its own shares.
SOURCES TO BUY-BACK
Free Reserve Specified securities
Securities premium Account.
Proceeds of any shares or other
However no buy-back shall be made out of the proceeds of an earlier issue of the same kind of Shares/securities. - 77A (I)???
Note:
In case shares are bought back out of free reserves then an equal sum shall be transferred to Capital Redemption Reserve Account . This can be used for issue of fully paid bonus shares. - 77A (A)???
CONDITIONS FOR BUYBACK
No company shall purchase its own shares / securities unless:
a. The buy-back is authorized by its articles. b. A special resolution passed.
Not applicable if the buy-back is less than 10% of the total paid up equity capital & free reserves of the co. Such buy-back is authorized by a board’s resolution. No offer of buy-back is made within one year of the preceding offer. The buy-back is or less than 25% of the total paid up capital and free reserves of the co.
a. In any F.Y. not to exceed 25% of its total paid-up equity capital in that F.Y.
CONDITIONS FOR BUY-BACK
Contd.
a. The ration of debt owed by the co. is not more than twice the capital and its free reserves.
Central government may prescribe a higher ratio for a class or classes of cos.
a. Shares / Securities are fully paid-up. b. For listed shares as per guidelines issued by SEBI. c. For unlisted shares guidelines can be prescribed. - (SEC 77A(2)???
NOTICE OF THE MEETING
- (SEC 77A(3))???
A full & complete disclosure
The time limit for completion of buy-back
The necessity for the buy-back
The class of security of buyback
The amount to be invested
SOURCES OF BUY-BACK
The buy-back may be:
From the existing security holders on a proportionate basis: or
From the open market;
From odd lots
By purchasing the securities issued to employees of the co. Pursuant to a scheme of stock option or sweat equity.
DECLARATION OF SOLVENCY
Declaration of solvency to be filed with the a. Registrar of company ; and b. SEBI (for listed co’s. only)???
That it is capable of meeting its liabilities and will not be rendered insolvent within one year of the date of declaration adopted by the board. This declaration is to be signed by at least two directors of the co. one of whom shall be M.D., If any.
DESTRUCTION OF THE SECURITIES - 77A (7)???
The company shall extinguish and physically destroy the securities so bought back within 7 days of completion of buy-back
FURTHER ISSUE OF SHARES - 77A (8)???
On completion of buy-back of shares / securities, the company shall not make further issue of the same kind of shares / securities within a period of six months except:
a. bonus shares; or b. conversion of warrants, or c. stock option schemes or sweat equity, or d. conversion of preference shares or debentures into equity shares
MAINTENANCE OF REGISTER
Company shall maintain a register of the :
Securities so bought
Consideration paid
Dates of cancellation, extinguishing and physically destroying of the securities, and
Other particulars as prescribed.
FILING A COMPLETION RETURN - 77a (10)???
A company shall file a completion return within 30 days of completion of buy-back of with the ROC and SEBI (for listed co’s.) With particulars as prescribed.
PENALTIES - 77A (11)???
For default: a. Imprisonment upto 2 years; or b. Fine upto rs. 50,000; or c. Both
PROHIBITION FOR BUY-BACK
No company shall directly or indirectly purchase its own shares / securities: a. Through any subsidiary co. Including its own subsidiary cos.’ Or b. Through any investment co. Or group of investment cos.; Or c. If a default, by the co,. in repayment of deposit or interest payable thereon, redemption of debentures or preference Shares or payment of dividend to any share holder or repayment of any term loan, or interest payable thereon to any bank or any financial institution is subsisting.
PROHIBITION FOR BUY-BACK - 77(B)???
Contd. In case such company has not complied with provisions of: a. Section 159 (annual return to be made by co. Having share capital)??? b. Section 207, (penalty for failure to pay dividend within 30 days)??? c. Section 211, (form & content of b/s & p&l account)???
DEBENTURE
According???to???the???Act,”debenture???includes???debenture,stock,bonds???and???other??? securities of a company,whether constituting a charge on the assets of the company or not.
CHARACTERISTIC FEATURES OF A DEBENTURE
It is issued by the company and is in the form Of a certificate of indebtedness.
A debenture holder has no right Of voting in???company’s???meetings.
It is of a series but can be a single debenture
It is a movable property
It usually specifies the date Of redemption
KINDS OF DEBENTURES
Bearer or unregistered
Redeemable
Registered
Unsecured or naked
Secured
Irredeemable or perpetual
Convertible or non-convertible
KOTHARI IND. CORP. LTD VS MAXWELL DYES & CHEMICALS (P) LTD.
The Co. proposed the following two resolutions: 1. Issue of shares by private placements to NRI entirely at the discretion of the Directors. 2. Issue???certain???no.???of???shares???to???the???promoter’s??? group subject to the limit of 51% of the share capital.
In the AGM both the resolutions were passed by overwhelming majority of shareholders. Only a group of minority share holders apposed the resolutions.
Contd..
The first resolution was challenged on the ground that the offer of P.C.D’s had been made to a select group viz. N.R.I’s to the detriment of minority share holders. The N.R.I’s were alleged to be the close associates of the promoters and it was alleged that offering shares to them would result in diluting the % of shareholding of the plaintiffs.
Contd..
The second resolution was challenged on the ground that the promoters could not issue 51% of the shares to select groups and that the F.I’s. while approving the resolution for allotment of preferential shares to the select group, did not consider certain factors, viz; the past record of the Co., productive use of funds, source for the promoters for funding the additional shares proposed to be allotted to them and family disputes among the promoters
doc_332345409.pptx
information about share, share capital and debenture. It describes different types of shares. It also explains buyback of shares.
DEFINITION OF SHARES
The capital of a company is divided into certain indivisible units of a fixed amount. These units are called shares. It may be defined as “interest in the company entitling the owner thereof to receive proportionate parts of profits, if any, and of a proportionate part of the assets of the company upon liquidation.”
MEANING OF STOCKS
Aggregate of fully paid-up shares, consolidated and divided, for the convenient holding into different parts. It may be transferred or split up into fraction of any amount, without regard to the original face value of share.
Share
Has nominal value
May not be fully paid up Transferrable in round numbers
Stock
Has no nominal value
Always fully paid up Transferrable in fractions
Can be issued directly
Cannot be issued directly
Has a distinctive number
All shares of class are of equal nominations
No such number
May be different denominations
TYPES OF SHARES
Preference share
Equity share
Sweat equity
With differential rights as to dividend, voting or otherwise
With voting rights
PREFERENCE SHARES
(Characteristics)???
They have preferential rights to be paid dividend during the life time of company;
They have preferential right to the return of capital when the company goes into liquidation [sec.85(1)]
TYPES OF PREFERENCE SHARES
Cumulative/ Non-Cumulative
Participating/ Non Participating
Convertible/ Non-Convertible
Redeemable/ Irredeemable
Share Warrant Issued only by public cos Provision in articles and approval from central govt. Only for fully paid up shares Holder is not a member of a company ,unless the articles so provide. Transferred by mere delivery. No registration is necessary. No stamp duty payable on transfer By usage a negotiable instrument Does not constitute share qualification of a director
Share Certificates Issued only by public and private cos It is a statutory obligations and none is necessary For all shares He is a member
For transfer of shares,registration is necessary. Stamp duty is payable on transfer of shares Not so directed It does
Holder cannot present a petition for winding up.
Dividend is paid to the holder of a share certificate by the issue of a dividend warrant
Holder can present such a petition
Dividend is payable to the holder of share warrant on the presentations of the relevant coupon attached to the share warrant
PROVISION OF SHARE TRANSFER
Proper Instrument
Validity of Instrument
Appeal against refusal to
Register
Forged Under Depository System
Refusal
Transfer
of Transfer
OTHER PROVISIONS ABOUT SHARES
FORFEITURE
TRANSMISSION OF SHARES
ISSUE OF SHARES AT DISCOUNT (UPTO 10%)???
ISSUE OF SHARES FOR OTHER CONSIDERATIONS (SEC.75)???
CLASSIFICATION OF SHARE CAPITAL BASED ON USAGE
NOMINAL, AUTHORISED, REGISTERED CAPITAL ISSUED CAPITAL SUBSCRIBED CAPITAL CALLED-UP CAPITAL PAID-UP
KINDS OF SHARE CAPITAL (SEC. 86)???
PREFERENCE SHARE CAPITAL [SEC. 85 (1)]
EQUITY SHARE CAPITAL [SEC. 85(2)]
ALTERATION OF CAPITAL ( Sec.94)???
Increase
Consolidation
Conversion
Sub-Division
Cancellation
REDUCTION OF CAPITAL
(SUBJECT TO CONFIRMATION BY TRIBUNAL)???
REDUCTION OF LIABILITY [SEC.100(1)(a)]
CANCELLATION OF PAID-UP SHARE CAPITAL (LOST) SEC.100(1)(b)1
PAYING OFF PAID-UP SHARE CAPITAL (EXCESS)??? SEC.100(1)C
RESTRICTION ON PURCHASE OF ITS OWN SHARES BY A COMPANY
Section 77(1) of the Company’s Act provides that a company limited by shares or a company limited by guarantee having a share capital cannot buy its own shares.
SOURCES TO BUY-BACK
Free Reserve Specified securities
Securities premium Account.
Proceeds of any shares or other
However no buy-back shall be made out of the proceeds of an earlier issue of the same kind of Shares/securities. - 77A (I)???
Note:
In case shares are bought back out of free reserves then an equal sum shall be transferred to Capital Redemption Reserve Account . This can be used for issue of fully paid bonus shares. - 77A (A)???
CONDITIONS FOR BUYBACK
No company shall purchase its own shares / securities unless:
a. The buy-back is authorized by its articles. b. A special resolution passed.
Not applicable if the buy-back is less than 10% of the total paid up equity capital & free reserves of the co. Such buy-back is authorized by a board’s resolution. No offer of buy-back is made within one year of the preceding offer. The buy-back is or less than 25% of the total paid up capital and free reserves of the co.
a. In any F.Y. not to exceed 25% of its total paid-up equity capital in that F.Y.
CONDITIONS FOR BUY-BACK
Contd.
a. The ration of debt owed by the co. is not more than twice the capital and its free reserves.
Central government may prescribe a higher ratio for a class or classes of cos.
a. Shares / Securities are fully paid-up. b. For listed shares as per guidelines issued by SEBI. c. For unlisted shares guidelines can be prescribed. - (SEC 77A(2)???
NOTICE OF THE MEETING
- (SEC 77A(3))???
A full & complete disclosure
The time limit for completion of buy-back
The necessity for the buy-back
The class of security of buyback
The amount to be invested
SOURCES OF BUY-BACK
The buy-back may be:
From the existing security holders on a proportionate basis: or
From the open market;
From odd lots
By purchasing the securities issued to employees of the co. Pursuant to a scheme of stock option or sweat equity.
DECLARATION OF SOLVENCY
Declaration of solvency to be filed with the a. Registrar of company ; and b. SEBI (for listed co’s. only)???
That it is capable of meeting its liabilities and will not be rendered insolvent within one year of the date of declaration adopted by the board. This declaration is to be signed by at least two directors of the co. one of whom shall be M.D., If any.
DESTRUCTION OF THE SECURITIES - 77A (7)???
The company shall extinguish and physically destroy the securities so bought back within 7 days of completion of buy-back
FURTHER ISSUE OF SHARES - 77A (8)???
On completion of buy-back of shares / securities, the company shall not make further issue of the same kind of shares / securities within a period of six months except:
a. bonus shares; or b. conversion of warrants, or c. stock option schemes or sweat equity, or d. conversion of preference shares or debentures into equity shares
MAINTENANCE OF REGISTER
Company shall maintain a register of the :
Securities so bought
Consideration paid
Dates of cancellation, extinguishing and physically destroying of the securities, and
Other particulars as prescribed.
FILING A COMPLETION RETURN - 77a (10)???
A company shall file a completion return within 30 days of completion of buy-back of with the ROC and SEBI (for listed co’s.) With particulars as prescribed.
PENALTIES - 77A (11)???
For default: a. Imprisonment upto 2 years; or b. Fine upto rs. 50,000; or c. Both
PROHIBITION FOR BUY-BACK
No company shall directly or indirectly purchase its own shares / securities: a. Through any subsidiary co. Including its own subsidiary cos.’ Or b. Through any investment co. Or group of investment cos.; Or c. If a default, by the co,. in repayment of deposit or interest payable thereon, redemption of debentures or preference Shares or payment of dividend to any share holder or repayment of any term loan, or interest payable thereon to any bank or any financial institution is subsisting.
PROHIBITION FOR BUY-BACK - 77(B)???
Contd. In case such company has not complied with provisions of: a. Section 159 (annual return to be made by co. Having share capital)??? b. Section 207, (penalty for failure to pay dividend within 30 days)??? c. Section 211, (form & content of b/s & p&l account)???
DEBENTURE
According???to???the???Act,”debenture???includes???debenture,stock,bonds???and???other??? securities of a company,whether constituting a charge on the assets of the company or not.
CHARACTERISTIC FEATURES OF A DEBENTURE
It is issued by the company and is in the form Of a certificate of indebtedness.
A debenture holder has no right Of voting in???company’s???meetings.
It is of a series but can be a single debenture
It is a movable property
It usually specifies the date Of redemption
KINDS OF DEBENTURES
Bearer or unregistered
Redeemable
Registered
Unsecured or naked
Secured
Irredeemable or perpetual
Convertible or non-convertible
KOTHARI IND. CORP. LTD VS MAXWELL DYES & CHEMICALS (P) LTD.
The Co. proposed the following two resolutions: 1. Issue of shares by private placements to NRI entirely at the discretion of the Directors. 2. Issue???certain???no.???of???shares???to???the???promoter’s??? group subject to the limit of 51% of the share capital.
In the AGM both the resolutions were passed by overwhelming majority of shareholders. Only a group of minority share holders apposed the resolutions.
Contd..
The first resolution was challenged on the ground that the offer of P.C.D’s had been made to a select group viz. N.R.I’s to the detriment of minority share holders. The N.R.I’s were alleged to be the close associates of the promoters and it was alleged that offering shares to them would result in diluting the % of shareholding of the plaintiffs.
Contd..
The second resolution was challenged on the ground that the promoters could not issue 51% of the shares to select groups and that the F.I’s. while approving the resolution for allotment of preferential shares to the select group, did not consider certain factors, viz; the past record of the Co., productive use of funds, source for the promoters for funding the additional shares proposed to be allotted to them and family disputes among the promoters
doc_332345409.pptx