Ch 5 Share Capital Flashcards
(46 cards)
What is meant by share?
“share” means a share in the share capital of a company.
Discuss the few characteristics of share and share certificate?
Shares and share certificates have several characteristics:
A share is a form of movable property, carrying rights and obligations, and is transferable from one
person to another in the manner provided by articles.
A share must be paid for. It must be paid for in full when it is allotted to the shareholder.
Every share in a company having a share capital shall be distinguished by its distinctive number.
A certificate issued in physical form under signature of authorised officer of the company as may be
specified or issued in book-entry form (i.e. electronic) shall be the main evidence of the title of the person
to such shares.
The manner of issue of a certificate of shares, form of such certificate and other matters may be
specified in articles.
First step of offering shares by the company is_____________________
Issuance of shares
What is subscription of shares?
When people or promoters pay for the shares,
this is termed as subscription of shares
What is meant by paying up of capital?
When shares are allotted to respective names of applicants, this is
termed as paying up of the capital.
What is authorized capital or nominal capital?
“authorised capital” or “nominal capital” means such capital as is authorised by the memorandum of a company
to be the maximum amount of share capital of the company.
what is meant by paid up capital?
The nominal value of shares that have been issued to shareholders. This amount may be equal to or less than
authorised share capital but cannot exceed it. This is also called allotted shares.
What are provisions regarding publication of authorized and paid up capital?
Where any notice, advertisement or other official publication of a company contains a statement of amount of
authorised capital of the company, such notice, advertisement or other official publication shall also contain a
statement in an equally prominent position and in equally conspicuous characters of amount of the paid up
capital.
Discuss the penalty if proisions to publication is not followed?
Any company which makes default in complying with the requirements of above and every officer of the company
who is party to the default shall be liable to a penalty not exceeding of level 1 on the standard scale.
A company having share capital shall issue_______________
only fully paid shares
What is par value or stated value?
This is face value of shares, also called par value and stated value.
What is market value?
This is the value at which share are traded at stock exchange or otherwise. This is usually higher than nominal
value.
Discuss the characteristics of ordinary shares that differ from preference shares?
*The ordinary shareholders are entitled to
vote at general meetings of the company.
Usually, different class of ordinary shares
have different voting rights.
*They are entitled to residual profit after
payment of preference dividend.
*They are entitled to all surplus assets after
return of nominal value to preference
shareholders.
*Ordinary shares may be of different
classes on the basis of different voting
rights, rights disproportionate to paid up
shares, or different entitlements of
dividend, right issue and issue of bonus
shares.
What are characteristics of preference shares that differ from ordinary shares?
*The preference shareholders are usually
not entitled to vote at general meetings of
the company or are entitled to vote for only
on certain issues as mentioned in articles.
*They are entitled to prior right (ahead of
ordinary shares) to dividend which is
usually fixed and cumulative.
*They have prior right of return of nominal
value, but no further participation in
surplus.
*Preference shares may be of different
classes on the basis of accumulation or
otherwise of the dividend on preference
shares, on the basis of redemption or
conversion of preference shares into
ordinary shares etc.
How shareholders rights are varied?
The variation in shareholders’ rights shall only be made by alteration of articles by passing a special resolution.
What option is available for members affected by alteration of resolution?
If alteration affects the substantive rights or liabilities of members or of a class of members, it shall be carried
out only if a majority of at least 3/4th of the members or of the class of members affected by such alteration vote
for such alteration.
What criteria is required to be met for shareholder to apply for cancellation of resolution?
Any member or members of affected class representing at least 10% shareholding of that class who are aggrieved
by the variation of their rights may, within 30 days of the date of the resolution varying their rights, apply to the
Court for an order cancelling the resolution.
The application may be made on behalf of the shareholders entitled to make it by such one or more of their
number as they may authorise in writing in this behalf.
On what basis court can declare the resolution null and void?
The court has got the powers to declare the resolution null and void if it feels that either:
the company withheld certain facts while getting the resolution passed, had the members been in
knowledge of those facts, they would not have passed the resolution varying the rights of a particular
class; or
the variation is otherwise prejudicial to the interest of members.
Within how many days order of court is filed to registrar?
The company is required to file a copy of the order of the court to the registrar within 15 days of receipt of the
order.
What is meant by variation in shareholders rights?
The variation in shareholders rights shall be made where company_____________
a) increase its authorised capital;
b) consolidate and divide its share capital into shares of larger amount than its existing shares;
c) sub-divide its shares, into shares of smaller amount than is fixed by the memorandum
d) cancel shares which have not been taken or agreed to be taken by any person, and diminish share capital
by the amount of the shares so cancelled.
How shre capital clause of memorendum is altered?
A company having share capital may, if so authorised by its articles, alter the authorised capital clause in
memorandum through a special resolution
The company shall file resolution and altered copy of memorandum with the registrar within__________
15 days from the
date of passing the resolution.
Where any shares issued are of a class which is the same as that of shares previously issued, the rights attaching
to the new shares shall be the same as those attached to the shares previously held in which cases?
In the event of consolidation or sub-division of shares
In a company limited by shares, the share capital represents capital introduced into the company by the
company’s _______________________
Members
