SHARES

ARUN.K.S,DIVYA.N.P,VISHNU.S, AATHIRA.S.THAMPY

 A share is the interest of a shareholder in a company. An interest having a money value and made up of diverse rights specified under the Articles of Association Each share in a company having share capital is distinguished by its appropriate number

 A share is evidenced by a share certificate(sec.84) A share certificate is issued by a company under its common seal. It specifies the shares held by a member and is prima facie evidence of the title of the member to the shares

Stock and shares

Stock is the aggregate of fully paid-up shares, consolidated and divided, for the purpose of convenient holding into different parts. It may be transferred or split up into fractions of any amount, without regard to original face value of the share.

Stock and shares distinction

1. A share has a nominal value, where as stock has no nominal value 2. Stock is always fully paid-up, while shares may not be so. 3. Stock is transferable in small fractions while shares can only be transferred in round numbers

4.All shares are of equal denomination. Stock may be of unequal amounts. 5.The fractions or parts of stock do not bear any distinctive numbers while shares always bear distinctive numbers. 6.Shares can be directly issued to the public whereas stock cannot be issued directly.

Types of Shares
Under Companies Act, 1956, a company can issue two types of shares Preference Shares Equity Shares

Preference Shares. Sec.85(1)

Preference shares with reference to any company limited by shares, are those which have 2 characteristics: a) They have a preferential right to be paid dividend during the lifetime of the company; and b) They have preferential right to the return of capital when the company goes into liquidation.

Equity Shares.Sec.85(2)
Equity shares, with reference to any company limited by shares are those which are not preference shares. Sweet Equity Shares means equity shares issued at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called.

Kinds of preference shares

1. 2. 3. 4. 5. 6. 7. Cumulative preference shares Non- cumulative preference shares Participating preference shares Non-participating preference shares Convertible preference shares Non-convertible preference shares Redeemable preference shares

Application and allotment of shares

An application for shares is an offer by a prospective shareholder of a company to take shares Allotment is the acceptance by the company of that offer. Allotment results in a binding contract between the company and the applicant.

Provisions of the Act applicable to application for and allotment of shares:

1.Minimum subscription Sec.69(1) No allotment shall be made of any share capital of a company offered to the public for subscription unless:
The amount stated in the prospectus as the minimum amount has been subscribed and The sum payable on application for such amount has been paid to and received b the company.

2.Application moneySec 69(3) to (6) The amount payable on application on each share shall not be less than 5%of the nominal amount of the share 3.Effect of irregular allotment (Sec. 71) Allotment of shares is irregular when it has been made by a company in violation of Sec.69or 70

4.Opening of the subscription list (Sec.72) According to sec.72 allotment can be made only after the beginning of the 5th day from the date of issue of the prospectus or on such later day as may be specified in the prospectus.

5.Shares and debentures to be listed on a stock exchange(sec.73)

Every company, intending to offer shares or debentures to the public for subscription by the issue of a prospectus, shall, before such issue, make an application to one or more recognized stock exchanges for permission for the listing of its shares or debentures.

6.Return as allotment (sec.75) Within 30 days of allotment of shares by a company, the company shall file with the Registrar a statement known as return as allotments. The return shall contain: a) Particulars about the shares allotted for cash, the names, addresses and occupations of the allottees, and the amount paid on each share.

b)Particulars about the shares allotted as fully or partly paid up for any consideration other than cash. c)Particulars about the bonus shares and the names, addresses and occupations of the allottees and a resolution authorizing the issue of such shares.

d)A copy of the resolution passed by the company authorizing issue of shares at a discount, and a copy of the company Law Boards order sanctioning the issue.

Calls on shares
A call is demand by the company on its shareholders to pay the whole or part of the balance remaining unpaid on each share. It is made in pursuance of a resolution of the Board of Directors and terms of the Articles. It may be made any time during the lifetime of the company or during its winding up.

Legal provisions relating to calls

1. Resolution of the Board Sec.292(1) 2. Bona fide and for the benefit of the company 3. Uniform basis Sec.91 4. Calls in advance Sec.92 5. In accordance with the Articles, amount, place and time of payment

Share Certificate
Every person whose name is entered as a member in the register of members of a company has a right to receive a certificate of his shares Article 7 (1) of Table A, Schedule 1.A share certificate shall be under the seal of the company, and shall specify-

a) The shares to which it relates b) The amount paid up thereon, and c) The name of the holder of the shares The share certificate shall be signed by at least 2 directors and secretary

Limitation of time for issue of share certificates (Sec 113) The company shall deliver share certificates
a) Within 3 months of the allotment of shares or b) Within 2 months after the application for registration of the transfer of any such shares

Object of share certificate

A share certificate under the seal of a company is prima facie evidence of the title of the member to y=the shares specified in the certificate Estoppel as to title Estoppel as to payment

Share Warrant(Sec 114 and 115)

A share warrant is a document issued by a public company stating that its bearer is entitled to the shares specified therein. It is transferable by mere delivery and is a substitute for the share certificate.

Transfer of shares
The shares of a member in a company are movable property, transferable in the manner prescribed in the Act and Articles of the company Sec.82

Provisions of the Act relating to transfer

1. Transfer not to be registered except on production of transfer deed (Sec.108) 2. Prescribed form 3. Period for delivery of transfer deed 4. Transfer by legal representatives Sec.109 5. Application for transfer Sec.110 6. Power to refuse registration and appeal against refusal sec.111

Lien of shares
Lien means a right to retain possession of some property of another until some claim attaching to it is settled. The right of lien on shares is not conferred on a company by the Statute. It must be clearly provided for the Articles.

Surrender of shares
When a shareholder of a company voluntarily gives up his shares in favor of the company, he said to have surrendered them to the company. The Companies Act does not contain any provision relating to the surrender of shares and Table A gives no power to the company to accept a surrender.

Forfeiture of shares
If a shareholder having been called upon to pay any call on his shares, fails to pay the call, the company has two remedies against the shareholder: 1. It may sue for the amount due 2. It may forfeit his shares

The company may forfeit its shares of a shareholder for non-payment of some calls if the following conditions are satisfied: 1. In accordance with Articles 2. Notice prior to forfeiture 3. Resolution of the Board 4. Good faith

Nomination of shares
Single holder Every holder of shares in, or holder of debentures of, a company may, at any time, nominate a person to whom his shares in, or debentures of, the company shall vest in the event of his death. The nomination will be in the prescribed manner Sec 109-A(1)

 Joint holder
Where the shares in, or debentures of ,a company are held by more than one person jointly, the joint holders may together nominate a person to whom all the rights in the shares or debentures of the company shall vest in the event of death of all the joint holders. The nomination will be in the prescribed manner Sec 109-A (2)

 Minor nomine Where the nominee is a minor, it shall be lawful for the holder of the shares, or holder of debentures, to make the nomination to appoint in the prescribed manner any person to become entitled to shares in or debentures of the company, in the event of his death during the minority Sec 109-A (4)

Power of company to purchase its own shares

Notwithstanding anything contained in the companies Act, 1956, a company may purchase its own shares or other specified securities. This is however subject to provisions as contained in Sec.77-A(2) and Sec.77-B.thus a company may purchase its own shares or other specified securities from: 1. Out of its free reserves; or 2. Out of the securities premium account; or

3.Out of the proceeds of an earlier issue other than fresh issue of shares made specifically for buy-back purposes. Sec.77-A(1)

Issue of securities at a premium

A company can always issue shares and other securities at a premium. The expression premium is not defined in the Act. It means the value of any advantage measurable in terms of money which is conferred on the company and which is over and above the cash payment on the shares issued by the company

The securities premium amount may be applied by the company

In issuing to members of the company fully paid bonus shares; or In writing of the preliminary expenses of the company; or In writing off the expenses of, or the commission paid or discount allowed on, any issue of shares or debentures of the company. In providing for the premium payable on the redemption of redeemable preference shares or debentures

Conditions for issue of shares at a discount

1. Shares to be of a class already issued 2. Resolution of company and sanction by Central Government 3. Maximum rate of discount 4. Company working for a year 5. Shares to be issued within 2 months of sanction of tribunal

Issue of Sweat Equity shares

For the purpose of Sec 79-A,the expression sweat equity shares means equity shares issued at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value additions by whatever name called.

 The issue of sweat equity shares is authorized by a resolution passed by the company in the general meeting The resolution specifies the number of shares, current market price, consideration if any, and the class or classes of directors or employees to whom such equity shares are to be issued

 Not less than one year has at the date of the issue elapsed since the date on which the company was entitled to commence business The sweat equity shares of the listed company are issued in accordance with the regulations made by the Securities and Exchange board of India in this behalf Sec.79-A(2)