Types of shares

Acdg to sec 86 of the companies Act co can issue two types of shares: 1. Equity shares: have residual right of the company. get higher dividend from profit. and share in assets at the time of winding up of the company. a. with voting rights b. with differential right to dividend or subject to conditions. 2. Preference share capital; Has to satisfy two conditions: Carry preferential right of dividend At the time of wound up carries preferential right of repayment of paid up capital.

Share capital and membership

A share is the interest of a shareholder in the definite portion of the capital, and a shareholder is the proportion owner of the company. An essential characteristic is that right of a shareholder to receive certain portion of the profit of the company.

It is a movable property can be mortgaged or pledged. Share certificate is the prima facie evidence of the title to member

Types of shares
May or may not carry other rights: Preferential right to dividend Right to share surplus profit Right to be paid fixed premium as per MA Right to share surplus assets in the event of winding up, after all capital have been repaid. Kinds of preference share Cumulative non cumulative pref share: the dividend not paid in any year, the defeciency must be made up out of the profit in the subsequent years before paid to any other holders. Non cumulative pref shares- the dividend paid only out of net profit of each year and cannot be carried on.

Types of shares
2. Participating and non participating pref shares: entitled to receive additional dividend out of excess profit. Non participating entitled only to the fixed dividend, usually pref shares are non participating. 3. Convertible and non convertible: which can be converted within certain period 4. Redeemable pref shares: which can be redeemed after fixed period at the option of the co. No company after the Amendment Act of 1996 issue shares which is irredeemable or redeemable after the period of 20 years from the date of its issue. Can be redeemed only if such shares are fully paid.

Types of shares
The shares which is redeemed should be filed with the registrar within one month of such issue and mention the B/S statement specifying capital consisting of such shares. If fails liable for Rs1000. 5. Guaranteed pref shares: incase of conversion of PVT into Limited or acquisition absorption the seller guarantees certain rate of dividend for certain years. 6. Cumulative Convertible Preference Share ( CCPs): The Govt in its guidelines 19th August 1985 permitted issue of CCPs for the folg purpose ( min dividend 10%)
1. setting up new projects 2. expansion or diversification of existing projects 3. normal capital expenditure 4. working capital requirement

stock
Stock is the aggregate of fully paid up shares legally consolidated. can be split up into fractions of any amount. It is to denote that company has fully paid amount of shares. The stock is transferable like share. Company can fix certain minimum amount of share that can be transferred separate register of stock holders with the authorization of SEBI and ROC. Deserve all rights and advantages.


1. 2. 3. 4.

Distinction between shares and stock

Fully paid up Nominal value Division into fraction Original issue Formality for issue ( stock with the OR) Numbering. Registration ( share capital before issuing. OR-SR membership

5.
6. 7. 8.

Issue of shares at par, premium and discount. Issue at par: subscribers paying the face value of the share. Par value of shares: is the notional value of the share Rs 10 or 100 as per govt of India circular in 1983. 1999 amended withdrawing the circular. Issue at premium : shares sold higher than its face value. need not be mentioned in the Articles.

Issue of shares
Premium received transfer to share premium A/C.

Premium can be used for the folg purposes: 1. For issue to the members as fully paid bonus shares. 2. For writing off the preliminary expenses. 3. Writing off expenses, commissions, discounts on the issue of shares or debentures. 4. Payment of premium payable on redeemable preference shares. No dividend can be payable out of premium without the permission of court leads to reduction of capital.

Issue of shares
Issue of shares at a discount ( sec 79)
Shares issued less than face value. 1. Shares to be issued must be of a class already issued. 2. Authorized by the resolution of shareholders 3. sanctioned by the CG or National CLT 4. Resolution specify the rate of discount not to exceed 10% unless special circumstances. 5. Issue discount only after 1 year of commencement. 6. Prospectus for issue at discount should contain the details, if fails Rs 500 fine.

Issue of shares
Difference betrween preference share and equity shares.
Preference shares 1.Preference to dividend 2. Fixed div, no rise in div subject to income tax. 3. No voting rights unless Specific cases 4. Face value higher100 5. Redeemable after certain Period(10 years) equity shares next preference dividend are fluctuating And non cumulative. have rights in proportion to the PU amt of share. FV 10 or 200 lesser always irredemabe

Issue of shares
Public issue of shares
Public co has to comply with the provisions of CLB, SEBI guidelines and coordination and cooperation of various agencies like underwriters, brokers, registrar to the issue, auditors and govt / statutory agencies(RBI) SEBI guidelines for issue Companies are free to make public issue, but confirm to the guidelines of SEBI called guidelines for disclosure and investor protection.

Issue of shares
SEBI guidelines 1. Appointment of Merchant banker 2. Registrar to the issue must be appointed 3. Partly paid shares must be fully paid. 4. No public issue if prohibited by SEBI 5. Follow the guidelines of SEBI if any. 6. Public issue by unlisted company by fulfilling following guidelines-

Issue of shares
a. Track record of payment of div- at least 3years out of 5 years. b. Must have minimum pre issue net worth not less than 1 crore in 3 out of 5 years.
7.Banking company allowed make a public issue with the approval of RBI. 8. Free public issue is provided by SEBI i,e at par or premium.

Issue of shares
Transfer, transmission of shares Transfer of share is an absolute right of the share holder. Articles cannot restrict the transfer. Procedure: transfer must be written, stamped and signed by the transferor and transferee with his name and address. Can be transferred to anybody without any restrictions. If application made by the transferor is is partly paid up shares can be registered after 2 weeks. Joint holders -Joint names must be signed by all.

Issue of shares
Refusal for the transfer: The co has the right to refuse if authorized by the Articles within two months of its transfer giving the appropriate reason. Refusal by the company on the ground reduction of marketable lot is invalid. The transferor can approach to the NCLT within 2 months.

Issue of shares
Membership in a company
Meaning of member and a shareholder Membership: ( a member but not a shareholder) 1. A company limited by guarantee 2. Transferor of share 3. Signatories to the MOA 4. Membership by estoppels misrepresenting as member 5. By an order from court of law Shareholder- but not member 1. Holder to a share warrant 2. Transferee or legal representative of the deceased.

Issue of shares
Modes of acquiring membership: By subscription to MOA Take qualification shares By application and allotment By transfer of share By transmission or succession Who may become a member Minor (Mohiri Dharmodas Ghose1903) Company. Subsidiary company cannot be a member of holding company but can be a LR of deceased Member of holding co. Partnership firm - cannot as it is not the legal peson. Foreigners. HUF.

Issue of shares
7. Joint holders- with condition 8. bankrupt: member but the benefits received by the official reciever. 9. Trustee acdg to sec 153 cannot be the member

Company secretary
Appointment & importance of company secretary: An individual can be appointed First secretary appointed by the promoter called as protem secretary. Appointed by BOD Promotes the growth of business Concentrate on management matters with his personal attention. Works on the instructions laid by the BOD Carries on the technical job like various legal provisions Can be appointed as financial controller and secretary. Types of secretary: 1. Private secretary: as a personal secretary.

Types of secretary: 1. Private secretary: as a personal secretary 2. Secretary of an association: for promoting art, science atc. Appointed by the managing committee.
3. Secretary of a government department: he is the executive head ( IAS) Controlled by the each ministers. Administrative and executive head of dept , chief advisor to the minister. 4. Secretary of a co-operative society ;

Company secretary

he is a officer of the society He is either paid or elected among the members. May be a part time or full time

5. Secretary of a local body: (SGBs) whole time secretary duty is Office management assist & conduct the meetings Ensuring the compliance of legal requirement 6. Company secretary
Qualifications any one or additional (qualifications) 1. Membership of ICSI 2. PG degree in commerce or corporate secretaryship 3. Membership in the ICAI 1949 4. Membership in ICWA 1959 5. PG degree or diploma in management & studies 6. Membership in association of secretaries & managers calcutta.

Company secretary

Company secretary
Other qualifications or qualities of CS
1.

2.
3. 4. 5. 6.

Sound education Proficiency in language Knowledge of office Knowledge of accountancy and taxation Knowledge of economics and banking impressive personality: sincerity, obedient, sense of responsibility, dependability, responsibility etc.

Company secretary
Penalty with non compliance of statutory requirement

Every person in default punishable with the fine of 500 every day. There shall be a defence to such person provided if the CG & court is satisfied. No defence provided for non filing certificate of WTS. Company cannot make blank statement for defence

Rights and powers of CS Rights as conferred by companies Act and Agreement with the company
1.
2. 3.

Company secretary

4.
5.

6.

Supervene and control the secretarial department. Sign the documents of the co as a principal officer. Perform the acts under MRTP, taxation laws etc,. Enter into contract on behalf of the directors. Cannot act which is not permitted- such act cannot be ratified Has the right to be indemnified by the co for any loss suffered by him

Company secretary
Exemption of provisions
Does not apply to limited company for promoting art, science, religion etc. Dismissal of the secretary: governed by the normal law applicable to master and servants( AOA) Removal secretary can be removed from the office with prior notice. For acts beyond or against the root of contract For willful obedience, negligence, misconduct, incompetence, permanent disability

Company secretary
Duties of a CS (liabilities)
Statutory duties B. general duties A. Statutory duties (under Companies Act) 1. Sign the documents of the company. 2. Give notice to the ROC regarding increase or reduction in the share 3. Deliver share certificate within 3 months of allotment 4. Entries in the register of members of share warrants. 5. Make available all documents, trust deeds for inspection 6. Send the notice of GM to all members 7. Make statutory declaration for commencement of business.
A.

Company secretary
8. Write minutes of every meeting within 30m days 9. Give notice to every directors in India of each meetings. 10. Sign P&L, B/S of banking companies. 11. Assist the liquidator in winding up in preparing the statement. 12. Maintain the statutory books register of investment, charges, members, debenture holders etc. Under Income Tax 1. Deduction IT from the salaries of employees 2. IT deducted from dividend of shareholders. 3. Serve the certificate IT deducted every shareholders. 4. File IT return of the company.

Company secretary
3. Under Stamp Act share certificate, share warrant, debenture certificate. 4. Under various other Acts ensure the company is complied with the provisions of the Acts. B. General duties 1. Duties to the directors correspondent and communicator 2. Duties to the shareholders mediator and advisor

Position of the company secretary

Company secretary

The Companies Act 1956 does not describe about the legal position of CS. It can be assessed by the duties he discharge to the company. 1. Acting as an agent and servant of the BOD (company) 2. Mere servant and can act only at the instructions of BOD 3. Position of CS has changed from a clerk to a principal officer from 1887 (Lord Esher)

Actual Position of the company secretary Present position of the CS given by Lord Danning ( Role) As an statutory officer Administrative officer go acdg to the various enactment as an co cordinator ( appointment of the employees, appearing before various cases, meetings, advising, grievance redressal etc.

Company secretary

Company meetings
General aspects of meetings
Meaning: when two or more persons come together to discuss the matters of common interest, or gathering or assembling of people for some purpose.

Kinds of meetings: 1. Public meetings: which is opened to all the public 2. Private meetings: for clubs, associations companies etc.

Company meetings: 1. Shareholders meeting

Company meetings

a. Statutory meeting b. extra ordinary general meeting: for the matter which has to be discussed immediately without postponed. c. AGM: every public company having share capital to hold once in a year. d. Class meetings: meeting of the preference share holder and meeting of the equity share holdrers.

2. Directors meeting a. BOD meetings: to frame policies and to review the progress of the company. b. meetings of committees of Board: only for board committee for specific purpose. 3. Creditors meetings: to take decision affecting their interest.
requisition of a valid meeting. Properly convened: by proper authority by the BOD and secretary by the empowerment of AOA of the company.

Company meetings

members Central Government or state government: u/s 167 National Company Law tribunal: EOGM.

Company meetings

2. Notice of the meeting: sent to all members who are entitled 21 days before the meeting.( excluding the time taken to reach through posting) Omission to give notice deliberate omission and accidental omission. ( young v. ladies Imperial club Ltd. 1920.)

a. Place of the meeting : at the registered office of the company. Within the city or place of regd office b. Day of the meting: AGM cannot conducted on holidays c. Time of the meeting d. Type of the business to be discussed Ordinary business: consideration of accounts, B/S, BODs and auditors. Declaration of dividend Appointment of directors Appointment and remuneration to auditors.

Company meetings

Mode of notice: By post, mail, advertisement in the news paper( share warrant holders). Adjourned meeting fresh notice is not required.

Company meetings

Notice of right of a member to appoint a proxy to vote and need not be a member.

Documents accompanying the notice ( for AGM) Audited financial statement, auditors report, explanation statement , proxy form.

Agenda

Company meetings

It means programme of business to be transacted at meeting . Agenda should be clear, explicit and unambiguous. Summary form The routine matters must be first stated and then other matters. Should be drawn up in consultation with the chairman Quorum: The minimum number of members who must be present to constitute a valid meeting. The meting is invalid without proper quorum.

(Quorum contnd)

Company meetings

Requisite quorum: Public company 5 members personally present.( except PSH) Any other company 2 members (Articles may extend the numbers)

Where two or more corporate bodies represented by an individual such bodies treated as individual persons.

Joint holders quorum

(Quorum contnd)

Company meetings

Course of action if quorum is not present

If not present within half an hour If GM is called on requisition of members, meeting shall be dissolved and adjourned to : 1. such a day, place and time as the board may decide 2. If the board does not determine it is adjourned to next week same time, place and day. 3. If at the adjourned meeting the quorum is not present the members present are the quorum.

(Quorum contnd)

Company meetings

Course of action if quorum is not present

One man meeting : Where he holds all the shares of a class. If he is a creditor, debenture holder. If the AGM called by the CG U/S167. One present as a proxy called by tribunal orders other than AGM. Continuous presence of quorum held in Hartley Baird Ltd. Quorum required is the quorum at the beginning and not in the continuation of the meeting. ( articles can decide)

Chairman of the meeting

Company meetings

Appointment of chairman: Regulation 50 -Appointed by the directors Regulation 51- if not present within 15 minutes of conducting the meeting one of the board should act as the chairman. Regulation 52- if no director willing to act, the members can choose one of their number to be the chairman. If the articles is silent regarding the appointment of chairman The members present shall be the chairman Election by voting showing their hands

Powers of the chairman 1. To preside over the meeting 2. Power to speak priority of speakers 3. Power to stop discussion ( cannot prevent fair discussion) 4. Power to put motions to vote( proposal of matters) 5. Right to use casting power( second vote if the articles provide) 6. Power to expel disorderly person. 7. Give ruling on point of order 8. Declare results of the voting ( including proxy)

Company meetings

Duties of the chairman See the order of the meeting Give reasonable opportunity to speak Maintain decorum at the meeting Ascertain sense of the meeting ( rules of each process) Duty to exercise casting vote Be impartial Regarding minutes previous and present

Company meetings

Proxies: A person appointed to represent another to vote at the meeting or a instrument by which a person is appointed. Appointment and other requisition of proxy: Company having no share capital cannot appoint proxy Private company cannot appoint more than one proxy to attend same occasion. Proxy need not be the member of the company, Every notice should give this information. ( if failed fine 5000) Appointment should be in writing & signed by him. A corporate has to give its seal and sign.( sign should match) joint members signed by all.

Company meetings

(Proxy contnd)

Company meetings

Proxy must be informed and presented 48 hours. Rights of proxy Proxy can demand a poll Vote only on poll

Disability
N o right to speak Not counted for the purpose of quorum
Inspection of the proxy by the secretary

Voting _ persons entitled to vote

1. 2.

Company meetings

3. 4.

5. 6.

Equity share holders Preference share holders: if the resolution affecting their interest. Holder of share warrants: oif the articles permit Joint holders : whoever is the senior person or appointed one Insolvent: only if his name appears in the registers Representative of president, PM, governor can vote ( will be treated as member of such comp[any

Statutory meeting

Company meetings

Every public company should hold this meeting within one month and not more than 6 months. object of holding the meeting: 1. To discuss the success of the formation. 2. To approve the modification of contracts mentioned in the prospectus. 3. Providing information to the members about the shares allotted, preliminary expenses, underwriting agreements and contracts etc. 4. The report should be sent to the ROC, if there is a default the company may be wound up.

(Statutory meeting) Notice to be given:

Company meetings

Every member of the company Legal representatives of deceased person The auditor of the company The public trustees. ( date, time and day of holding statutory meeting same as general aspects of the meeting) Contents of the statutory report Shares Cash received in respect of all the shares
1.

(Statutory meeting)
1. 2.

Company meetings

3.
4. 5. 6. 7.

total cash received on fully paid share Receipt and payments from issue of shares Issue of debentures and Other sources Directors Contracts Underwriting contracts Arrears of calls Commission or brokerage

Company meetings Annual General meeting:

Every company in each year should hold a meeting in addition to any the meeting which is called as AGM. The term year is the calendar year and not the from the date of incorporation.

Which company to hold AGM

Every company having or not having share capital, limited or unlimited. Objects of AGM To reveal the information of the company growth, success to the members. Placing the accounts of the company by the BODs.

Share holders exercise control over the management by appointing them. Replacement of auditors Dividends declared by the directors All other matters that require approval of shareholders.

Company meetings

Time period to hold AGM The first AGM should be held within 18 months from the date of incorporation ( even the registrar cannot extend this time limit) Extension of time: the AGM can be extended by 3 months, but the interval between the two AGM should not exceed more than 18 months.( does not apply to newly incorporated co)

Validity of AGM held beyond statutory time : is not void

and all resolution are valid .the effect is that it involves penalty. The proper authority: the BODs

Company meetings

( time day place same as general aspects)

Business to be transacted:
Ordinary business with an ordinary resolution Special business matters related to ordinary business with a special resolution Eg: removal of the directors, issue of a bonus shares, issue of right shares, election of a person as a director other than retiring director.

Adjourned AGM:
1.

Company meetings

Power of CG to call AGM - when there is application given by members. 2. Penalty: 50000 or 2500 everyday during which the default continues. The company would not be held liable if it is due to a cause beyond its control ( case on company in kerala where the books were seized by the police and produced in the criminal court. Chairman speech in brief necessary ( infn in the report) Review of the company working, Progress during the year, Difficulties and constraints faced by the company, measures initiated to overcome such difficulties, prospects of the co.

Extraordinary general meeting

Company meetings

Regulation 47 of the Table A provides All general meeting other than AGM and statutory meeting called as EOGM EOGM may be conducted for the following reasons ( special business transactions with a special resolution) Changes in MOA Changes in AOA Reduction or reorganization of share capital Issue of debentures Removal of Directors Removal of Auditors

Who can convene this meeting

Company meetings

The BODs on its own or by the requisition of members By requisitionsists themselves 1. In the case of company having share capital, holders of at least 10%of the paid up capital of the co and 2. If the co has no share capital members with 10% voting right. With the signature of all such requisitionsists this is the eligibility By NCLB

Time period for holding EOGM- should be held within 3 months from the date of deposit of request. May b e adjourned to such date after the expiry of 3 month. No other business to be transacted except for which it is convened The company should repay all end reasonable expenses incurred by the requisitionsists. No action can be taken against the directors, because the alternate remedy for convening the meeting lies with the requisitionsists. (time, place, day same as general aspects)

Company meetings

Board meeting

Company meetings

Every company should hold the board meeting: At least once in every 3 months, and At least 4 times in a year No year shall expire without such directors m eeting.

The provisions of section 285 the board shall meet on every 1st of jan and 31st of march. The small companies are relaxed from this provision by CG

Notice of the meeting: To every directors for time being in India. Failure to serve notice every officer in default shall be punishable for the fine up to 1000. Director who is not involved my sue for the declaration of the entire proceedings as invalid The Act does not provide for adjournment of the meeting Notice need not be in any particular form, it can be according to the provisions of the articles as to how many meetings should be conducted and which day it has to be held.

Company meetings

Place and time of the meeting

Company meetings

Board meeting can be held any day any time without any restriction as per the convenience of all the directors. Quorum :

One third of the total strength or two whichever is higher. Disinterested quorum: if any directors entitled to vote for the
resolution n does not present in the quorum it is disinterested quorum. Which means: one third present should be disinterested or two disinterested directors.

Agenda of the meeting:

Company meetings

It is not obligatory but customary to send the agenda to all the directors. Secretary has to send the agenda with the consultation of the chairman. Every board meeting should have a chairman to preside over the meeting. Resolution : has to be signed by all the members without any objections. Directors attendance register should be maintained for everu BOD meeting.