Clsp-Sha Cap and Membership &CS

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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 timeof 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 toreceive 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 tomember



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 inthe subsequent years before paid to any other holders.

Non cumulative pref shares- the dividend paid only out of netprofit 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 fixedperiod 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 20years 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/Sstatement 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 guaranteescertain 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.



Distinction between shares and stock

1. Fully paid up

2. Nominal value

3. Division into fraction

4. Original issue5. Formality for issue ( stock with the OR)

6. Numbering.

7. Registration ( share capital before issuing. OR-SR 8. membership



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 theshare – Rs 10 or 100 as per govt of Indiacircular 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 redeemablepreference 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 equity shares

1.Preference to dividend next preference

2. Fixed div, no rise in div dividend are fluctuating subject to income tax. And non cumulative.

3. No voting rights have rights in proportion

unless Specific cases to the PU amt of share.4. Face value higher100 FV 10 or 200 lesser

5. Redeemable after certain always irredemabe

Period(10 years)



Issue of shares

Public issue of shares

Public co has to comply with the provisions of CLB,SEBI guidelines and coordination and cooperationof 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 confirmto 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 withthe approval of RBI.

8. Free public issue is provided by SEBI i,e at par orpremium.



Issue of shares

Transfer, transmission of shares

Transfer of share is an absolute right of the shareholder.

Articles cannot restrict the transfer.

Procedure: transfer must be written, stamped andsigned by the transferor and transferee with hisname and address.

Can be transferred to anybody without any restrictions.

If application made by the transferor is is partly paid upshares 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 theappropriate 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 shareholderMembership: ( 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 sharesModes 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.

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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

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Company secretary Appointment & importance of company secretary:

An individual can be appointed

First secretary appointed by the promoter called as protemsecretary.

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.

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Company secretary Types of secretary:

1. Private secretary: as a personal secretary

2. Secretary of an association: for promoting art, scienceatc. 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 ; he is a officer of the society

He is either paid or elected among the members.

May be a part time or full time

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Company secretary5. 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.

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Company secretary

Other qualifications or qualities of CS

1. Sound education

2. Proficiency in language

3. Knowledge of office

4. Knowledge of accountancy and taxation

5. Knowledge of economics and banking

6. impressive personality: sincerity, obedient, sense of

responsibility, dependability, responsibility etc.

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Company secretary

Penalty with non compliance of statutory requirement

Every person in default punishable with the fine of 500every day.

There shall be a defence to such person provided if theCG & court is satisfied.

No defence provided for non filing certificate of WTS.

Company cannot make blank statement for defence

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Company secretaryRights and powers of CS

Rights as conferred by companies Act and Agreement

with the company 1. Supervene and control the secretarial department.

2. Sign the documents of the co as a principal officer.

3. Perform the acts under MRTP, taxation laws etc,.

4. Enter into contract on behalf of the directors.

5. Cannot act which is not permitted- such act cannot be

ratified6. Has the right to be indemnified by the co for any loss

suffered by him

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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 andservants( 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

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Company secretary

Duties of a CS (liabilities)

A. 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 inthe 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.

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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 thestatement.

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.

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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

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Company secretaryPosition of the company secretary

The Companies Act 1956 does not describe about the legalposition of CS. It can be assessed by the duties hedischarge 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 principalofficer from 1887 ( Lord Esher )

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Company secretary 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 meetings



Company meetings

General aspects of meetings

Meaning: when two or more persons come together to discussthe 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 public2. Private meetings: for clubs, associations companies etc.

Company meetings



Company meetingsCompany meetings:

1. Shareholders meeting

a. Statutory meeting

b. extra ordinary general meeting: for the matter which has tobe discussed immediately without postponed.

c. AGM: every public company having share capital to holdonce in a year.

d. Class meetings: meeting of the preference share holder andmeeting of the equity share holdrers.

Company meetings



Company meetings2. 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 andsecretary by the empowerment of AOA of the company.

Company meetings



Company meetings members

Central Government or state government: u/s 167

National Company Law tribunal: EOGM.

2. Notice of the meeting:

sent to all members who are entitled 21 days before themeeting.( excluding the time taken to reach through posting)

Omission to give notice deliberate omission and accidental omission.( young v. ladies Imperial club Ltd. 1920.)

Company meetings



Company meetingsa. 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 meetingd. 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



Company meetings Mode of notice:

By post, mail, advertisement in the news paper( share

warrant holders). Adjourned meeting – fresh notice is not required.

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

Documents accompanying the notice ( for AGM)

Audited financial statement, auditors report, explanationstatement , proxy form.

Company meetings



Company meetings Agenda

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.

Company meetings



Company meetings(Quorum contnd)

Requisite quorum:

Public company – 5 members personally present.( exceptPSH)

Any other company – 2 members(Articles may extend the numbers)

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

Joint holders quorum

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 bedissolved and adjourned to :

1. such a day, place and time as the board may decide2. 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 themembers present are the quorum.

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 thecontinuation of the meeting. ( articles can decide)

Company meetings



Company meetingsChairman of the meeting

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

Company meetings



Company meetingsPowers 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 articlesprovide)

6. Power to expel disorderly person.

7. Give ruling on point of order8. Declare results of the voting ( including proxy)

Company meetings



Company meetingsDuties 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



Company meetingsProxies:

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 toattend 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. Acorporate has to give its seal and sign.( sign should match)

joint members signed by all.

Company meetings



Company meetings( Proxy contnd )

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

Company meetings



Company meetings Voting _ persons entitled to vote

1. Equity share holders

2. Preference share holders: if the resolution affecting theirinterest.

3. Holder of share warrants: oif the articles permit

4. Joint holders : whoever is the senior person or appointedone

5. Insolvent: only if his name appears in the registers

6.

Representative of president, PM, governor can vote ( willbe treated as member of such comp[any

Company meetings



Company meetingsStatutory meeting

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 theprospectus.

3. Providing information to the members about the sharesallotted, preliminary expenses, underwriting agreementsand contracts etc.

4. The report should be sent to the ROC, if there is a defaultthe company may be wound up.

Company meetings



Company meetings(Statutory meeting)

Notice to be given:

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 asgeneral aspects of the meeting)

Contents of the statutory report Shares

Cash received in respect of all the shares

1.

Company meetings



Company meetings(Statutory meeting)

1. total cash received on fully paid share

2. Receipt and payments from

issue of shares

Issue of debentures and

Other sources3. Directors

4. Contracts

5. Underwriting contracts6. Arrears of calls

7. Commission or brokerage

Company meetings



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, successto the members.

Placing the accounts of the company by the BODs.

Company meetings



Company meetings 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.

Time period to hold AGM

The first AGM should be held within 18 months from the dateof incorporation ( even the registrar cannot extend thistime limit)

Extension of time: the AGM can be extended by 3 months , butthe interval between the two AGM should not exceed

more than 18 months.( does not apply to newly incorporated co)

Company meetings



Company meetingsValidity 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

( 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 aspecial 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.

Company meetings



Company meetings Adjourned AGM:

1. 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 beyondits control ( case on company in kerala where the books

were seized by the police and produced in the criminalcourt.

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.

Company meetings



Company meetingsExtraordinary general meeting

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

Company meetings



Company meetingsWho can convene this meeting

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 and2. 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

Company meetings



Co pa y ee gs 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 3month.

No other business to be transacted except for which it isconvened

The company should repay all end reasonable expensesincurred by the requisitionsists.

No action can be taken against the directors, because thealternate remedy for convening the meeting lies with therequisitionsists.

(time, place, day same as general aspects)

Company meetings



p y gBoard meeting

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

Company meetings



p y gNotice of the meeting:

To every directors for time being in India.

Failure to serve notice every officer in default shall bepunishable 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 beaccording to the provisions of the articles as to how many

meetings should be conducted and which day it has to beheld.

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p y gPlace and time of the meeting

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 isdisinterested quorum.

Which means: one third present should be disinterested or

two disinterested directors.

Company meetings



p y g Agenda of the meeting:

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 presideover the meeting.

Resolution : has to be signed by all the members without any objections.

Directors attendance register should be maintained for everu BODmeeting.

Clsp-Sha Cap and Membership &CS

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Transcript of Clsp-Sha Cap and Membership &CS