shares & share capital final ppt

37
Corporate Law Topic:- Shares & Share Capital

Upload: rupal-nahar

Post on 02-Apr-2015

2.531 views

Category:

Documents


8 download

TRANSCRIPT

Page 1: SHARES & SHARE CAPITAL FINAL ppt

Corporate Law

Topic:-Shares & Share Capital

Page 2: SHARES & SHARE CAPITAL FINAL ppt

Share-holders

• Pooja Ajmera P 60

• Rupal Nahar P 29

• Swati Khandelwal P 36

• Anil Varma P 58

• Ravi Ramparia P 41

• Dipti Joglekar P 54

• Meenal Saturkekar C 31

Page 3: SHARES & SHARE CAPITAL FINAL ppt

SHARES

DEFINITIONS

• The Companies Act defines a share as “Share in the Share Capital of the company, and includes stock except where a distinction between stock and share is expressed.”

• According to J.Farwell a share is “ the interest of a shareholder in a company measured by the sum of money, for the purpose of liability in the first place and of interest in the second.”

Page 4: SHARES & SHARE CAPITAL FINAL ppt

NATURE OF A SHARE

• Shares in India, are both goods as well as chose – in – action. It is bundle of rights, each one of which is a legal chose – in – action. The legal title to the share is vested in the person entitled to it, either by the company or by transfer from a former holder.

Page 5: SHARES & SHARE CAPITAL FINAL ppt

STOCKS:

Share clubbed together is known as stock

When company issue share certificate then it is STOCKS

Page 6: SHARES & SHARE CAPITAL FINAL ppt

Distinction between Share and Stock

Shares Stocks

•It has the nominal value or facevalue•It has the distinctive number•Shares can be originally issued by a company.

•Share is an indivisible unit therefore it cannot be transferred in fraction and it can be transferred only as a whole.•Shares of the same class are of equal denomination.

•It has no nominal value or facevalue•It has no distinctive number•A company cannot originally issue stock first shares will be issued, the shares are fully paid up then can be converted into stock.•Stock may be transferred in any fractions.

•Stock may be of differentdenomination.

Page 7: SHARES & SHARE CAPITAL FINAL ppt

•Before Passing Companies Act, 1956, Shares Used To Be In Three Types Ordinary Shares Preference Shares Deferred Shares

•After Companies Act , Companies Issued Only Two Types Of Shares Preference Shares Equity Shares

TYPES OF SHARES

Page 8: SHARES & SHARE CAPITAL FINAL ppt

ALLOTMENT OF SHARES

• When An Application Is Accepted, It Is An Allotment.

• It Is An Appropriation Out By The Directors To Transfer The Ownership Of Shares To A Particular Person.

• A Valid Allotment.

Page 9: SHARES & SHARE CAPITAL FINAL ppt

STATUTORY RESTRICTIONS ON ALLOTMENT

• Prohibition Of Allotment Unless Minimum Subscription Received [S. 69]:

• Prohibition Of Allotment In Certain Cases Unless Statement In Lieu Of Prospectus Delivered To Registrar [S.70]:

• Effect Of Irregular Allotment [S.71]:

Page 10: SHARES & SHARE CAPITAL FINAL ppt

STATUTORY RESTRICTIONS ON ALLOTMENT

• Applications For, And Allotment Of, Shares And Debentures[S.72] :

• Shares To Be Dealt In On Stock Exchange [S.73] :

• Over-subscribed Prospectus [S.73(2-a)] :

Page 11: SHARES & SHARE CAPITAL FINAL ppt

GENERAL PRINCIPLES

• ALLOTMENT BY PROPER AUTHORITY

• WITHIN RESONABLE TIME

• MUST BE COMMUNICATED

• ABSOLUTE AND UNCONDITIONAL

Page 12: SHARES & SHARE CAPITAL FINAL ppt

CERTIFICATE OF SHARES

Page 13: SHARES & SHARE CAPITAL FINAL ppt

SHARE CERTIFICATE

Page 14: SHARES & SHARE CAPITAL FINAL ppt

Transfer of shares• When joint stock companies were established, the

great object was that the shares should be capable of being transferred. Accordingly, by section 82 of the companies Act, it is provided that the shares of a member in a company shall be moveable property capable of being transferred in the manner provided by the articles of the company.

RESTRICTIONS ON THE TRANSFER OF SHARES• Is open to a company to restrict the right of its

members to transfer their shares. The article of a private company as against those of a public company contain more rigorous restrictions on its members to transfer their shares.

Page 15: SHARES & SHARE CAPITAL FINAL ppt

BROKERAGE• The Company Act, 1956, permits brokerage

to be paid as has been lawful for a company to pay. It has been recognized in Metropolitan Coal Consumers Assn vs. Scringeour that reasonable brokerage should always be allowed.

• Brokerage is different from underwriting commission. A broker does not undertake to subscribe for shares to the extent of public default.

• Brokers are professional men, such as “stock-brokers, bankers and the like, who exhibit prospectus and send them to their customers, and by whose mediation the customers are induced to subscribe.

Page 16: SHARES & SHARE CAPITAL FINAL ppt

ISSUE OF SHARES AT PREMIUM

• If the market exists, a company may issue its shares a price higher than their nominal value. There is no restriction on the sale of share at a premium.

• SEBI guidelines have to be observed as they indicate when an issue has to be at par and when premium is chargeable.

• Premium may be received in cash or kind. An amount received extra than the nominal value due to the premium should be carried to the share premium account.

Page 17: SHARES & SHARE CAPITAL FINAL ppt

Types of Share

Page 18: SHARES & SHARE CAPITAL FINAL ppt

Equity shares

• Equity shares, with reference to any company limited by shares , are those which are not Preference shares [Sec.85(2)].

• The holders of these shares are entitled to dividend after the fixed dividend on preference shares has been paid.

• The dividend to equity shareholders will vary with the amount of profits available for distribution.

Page 19: SHARES & SHARE CAPITAL FINAL ppt

Equity shares

These shares carry the right to receive the whole of surplus profits after the preference shares, if any.

Further, directors have the sole right of recommending dividends to such shares and as such they may not get any dividends in case the director choose so.

Holders of equity shares are the actual owners of the company.

Page 20: SHARES & SHARE CAPITAL FINAL ppt

•Advantage •Disadvantage

•Equity shares do not create any obligation to pay a fixed rate of dividend.

•If only equity shares are issued the company can not take the advantages of trading on equity.

•Equity shares can be issued without creating any charge over the assets of the company.

•As equity capital can not be redeemed there is a danger of overcapitalization.

•It is a permanent source of capital and the company has not to repay it except under liquidation.

•Equity share holders can put obstacles in management by manipulation and organizing themselves.

•Equity share holders are the real owners of the company who have the voting rights.

•During prosperous periods higher dividends have to be paid leading to increase in value of shares in the market and speculation.

•In case of profits equity share holders are the real gainers by way of increased dividends and appreciation in the value of shares.

•Investors who desire to invest in safe securities with a fixed income have no attraction for such shares.

Equity shares

Page 21: SHARES & SHARE CAPITAL FINAL ppt

Preference shares

• Such shares enjoy some preferential right:

1: As to the payment of dividend at a fixed rate during the life of the company.

2: As to the return of capital winding up of the company.

If any share carry only one of above these two preferential rights, they will be treated as equity shares.

Page 22: SHARES & SHARE CAPITAL FINAL ppt

Kinds of Preference share

• Cumulative preference shares• Non-cumulative preference shares• Participating preference shares• Non-participating preference shares• Convertible preference shares• Non-convertible preference shares• Redeemable preference shares• Irredeemable preference shares

Page 23: SHARES & SHARE CAPITAL FINAL ppt

Comparison between Preference & equity shares

•Preference shares •Equity shares

•These shares are entitled to a fixed rate of dividend.

•The rate of dividend on equity shares depends upon the amount of profit available and the funds requirements of the company for future expansion etc.

•Dividend on these shares is paid in preference to the equity shares.

•The dividend on equity shares is paid only after the preference dividend has been paid.

•Redeemable preference shares may be redeemed by the company.

•Equity shares can not be redeemed except under a scheme involving reduction of capital or buy back of its own shares.

•The voting rights of these shares are restricted.•An equity share holder can vote on all matters affecting the company.

•The preference shares have preference to equity shares with regard to payment of capital on winding up.

Page 24: SHARES & SHARE CAPITAL FINAL ppt

Deferred shares

They are also known as “founder shares", since they are often held by the promoter of the company.

They are issued as other ordinary shares and gets a fixed dividends just like preference shares.

But they are the last to receive both as regards dividends and repayment of capital.

Page 25: SHARES & SHARE CAPITAL FINAL ppt

SHARE CAPITAL• Share capital means the capital raised by a company

by the issue of shares.

kinds OF SHARE CAPITAL• The capital of the company may be two types:

Preference Share Capital : In case of a company limited by shares, that part of the capital of the company which carries a preferential right as to payment of dividend during the lifetime of the company and repayment of capital on winding up of the company is known as Preference Share Capital.

Equity Share Capital : All the share capital which is not preference share capital is known as equity share capital. Capital which does not carry any preferential rights.

Page 26: SHARES & SHARE CAPITAL FINAL ppt

Types of Share Capital

• Authorized capital

• Issued capital

• Subscribed capital

• Called up capital

• Un-called capital

• Paid-up capital

• Reserve capital

Page 27: SHARES & SHARE CAPITAL FINAL ppt

PREFERENCE SHARE CAPITAL

• Preference share capital means that part of the share capital of a company which fulfils both the following requirements:

During the continuance of the company it must be assured of a preferential dividend.

On the winding up of the company it must carry a preferential right to be paid up.

Page 28: SHARES & SHARE CAPITAL FINAL ppt

VOTING RIGHTS• EQUITY SHAREHOLDERS RIGHTS[sec. 87 (1)] :

An equity shareholder of a company limited by shares has a right to vote on every resolution placed before it. His voting right on a poll is in proportion to his share of the paid-up equity capital of the company.

• Preference share capital[sec. 87 (2)] : A preference shareholder has the right to vote on those resolutions which directly affect his rights. Any resolution for winding up the company or for the repayment or reduction of its share capital is deemed to directly affect the rights of the preference share holder.

Page 29: SHARES & SHARE CAPITAL FINAL ppt

FURTHER ISSUE OF CAPITAL

Further issue of capital of a company may take place

• By allotment of new shares [sec. 81(1) to (3)]: A public company limited by shares may, at any time, increase its subscribed shares capital within the limit of authorized capital by issuing new shares. It is for the directors to decide whether an increase in the subscribed capital of the company is necessary or not.

• by conversion of debentures or loans into shares [sec. 81(4) to(7)] : where a company has taken loan from the central government by issuing any debentures or otherwise, the government may, in the public interest , convert such debentures or loans into shares in the company.

Page 30: SHARES & SHARE CAPITAL FINAL ppt

Alteration of capital clause

Alternation in the capital clause of the memorandum may be of the following types:

• Alteration of share capital[sec. 94-97]• Reduction of capital[sec.100-105]• Reserve share capital or reserve

liability[sec.99]• Variation of the rights of the share

holders[sec.106-107] • Reorganization of capital[sec.390-391]

Page 31: SHARES & SHARE CAPITAL FINAL ppt

ALTERATION OF CAPITAL A limited company having a share capital

may, if so authorized by its Articles, alter its share capital as follows

• Increase nominal share capital by issuing new shares

• Consolidate and divide all or any part of its share capital into shares of larger amount

• Convert fully paid-up shares into stock or vice versa

• Sub-divide its shares, or any of them, into shares of smaller amount, and

• Cancel share which have not been taken up and diminish the amount of its authorized capital by the amount of the shares so cancelled.

Page 32: SHARES & SHARE CAPITAL FINAL ppt

REDUCTION OF CAPITAL Under sec 100, a company limited by shares

having a share capital may reduce its share capital. Subject to the confirmation by the court, in any of the following three ways:

• It may extinguish or reduce the liability on any of its shares in respect of share capital not paid-up; or

• It may either with or without extinguishing or reducing liability on any of its shares, cancel any paid-up capital which is loss, or is unrepresented by available assets; or

• It may, either with or without extinguishing or reducing liability on any of its shares , pay-off any paid-up share capital which is in excess of the wants of the company.

Page 33: SHARES & SHARE CAPITAL FINAL ppt

Reserve share capital or reserve liability

• This section provides that by passing a special resolution, a company may determine that any portion of its share capital which has not already been called up shall not be capable of being called up except in the event of company's winding up.

• Such capital is called reserve share capital.

Page 34: SHARES & SHARE CAPITAL FINAL ppt

Variation of the rights of share holders

Share capital of a company is divided into different classes of shares which may have different rights attached to them. if the company intends to change the rights of any class of share holders, the following procedure has to be followed:

• Variation not prohibited• Special resolution

Page 35: SHARES & SHARE CAPITAL FINAL ppt

Reorganization OF CAPITAL The reorganization of share

capital of a company may take place

• By the consolidation of shares of different classes; or

• By the division of shares of one class into shares of different classes; or

• By both these methods.

The reorganization of the share capital of a company may be proposed

• Between a company and its creditors or any of class of them; or

• Between a company and its members or any classes of them.

Page 36: SHARES & SHARE CAPITAL FINAL ppt

REFERENCES

• COMPANY LAW - AVTAR SINGH

• COMPANY LAW - R P & S N MAHESHWARI

• ELEMENTS OF COMPANY LAW – N.D.KAPOOR

• COMPANY LAW – ASHOK K BAGRIAL

Page 37: SHARES & SHARE CAPITAL FINAL ppt

THANKS TOONE AND

ALL