Presentation2company Law

8/12/2019 Presentation2company Law

1/57

Reliance Power IPO

oversubscribed in 60 sec

Tuesday, 9.55 am: The Anil Ambani-

controlled Reliance Power opens for stock

subscription in the Rs 405-Rs 450 range.9.56 am: History is created the stock is

oversubscribed. By evening the Rs 11,600-

crore issue is oversubscribed a staggering

10.55 times. And its still three days to go

before subscriptions close.


2/57


3/57

INDIAN MARKETS FOR 28

JAN 2008


4/57


5/57


6/57


7/57

SHARES, CAPITAL,

DEBENTURE

BHAWANI

ANOOP

NADEEM

PRAMOD

BHARGAV

KULDEEP

Presented by


8/57


9/57

Definition of Shares

A share in the share capital of a company, andincludes stock except where a distinctionbetween stock and share is expressed orimplied.

In other the company

is divided

words,a share in a company is one of the units

into which the total capital of


10/57


11/57

Definition of Shares

A share in the share capital of a company, andincludes stock except where a distinctionbetween stock and share is expressed orimplied.

In other the company

is divided

words,a share in a company is one of the units

into which the total capital of


12/57

Example:

If the capital of a company is 10000and is

divided into 1000 units of Rs10 each, each

unit of Rs.10 shall be called a share of the

company.


13/57

Kinds of shares

SHARES

SHARES

PREFERENCE EQUITYDEFERRED

SHARES

CUMULATIVE NON-CUMULATIVE

PARTICIPATING

OR

NON-PARTICIPATING

CONVERTIBLE

OR

NON-CONVERTIBLE

REDEEMABLEOR

IRREDEEMABLE

PARTICIPATING

OR NON-PARTICIPATING

CONVERTIBLE

OR

NON-CONVERTIBLE

REDEEMABLE

OR IRREDEEMABLE


14/57


15/57

Voting right of preference

shareholder

They do not enjoy normal voting right like

equity share holders, they are however

entitled to vote in following two cases:

When any resolution directly affecting their

rights is to be passed.

When the dividend due (whether declared

or not) on their preference shares or part

thereof has remain unpaid.


16/57

Kinds of preference shares

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


17/57

Equity shares

These shares carry the right to receive thewhole of surplus profits after thepreference shares, if any.

Further, directors have the sole right ofrecommending dividends to such sharesand as such they may not get anydividends in case the director choose so.

Holders of equity shares are the actualowners of the company.


18/57

Equity Shares

They have voting rights in the meeting of the company.

They have a control over the working of the company.

Equity share holders are paid dividend after paying it to thepreference share holders.

The rate of dividend on these shares depends upon the

profits of the company. They may be paid a higher rate ofdividend or they may not get anything.

These share holders take more risk as compared topreference share holders.

Equity capital is paid after meeting all other claimsincluding that of preference share holders.

They take risk both regarding dividend and return of capital.

Equity share capital can not be redeemed during the lifetime of the company.


19/57

Equity Shares..

Advantage DisadvantageEquity 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 ofthe company who have the voting rights. During prosperous periods higher dividendshave 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.


20/57

Comparison between Preference & equity

shares

Preference shares Equity sharesThese 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 hasbeen 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.


21/57

Deferred shares

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

They are issued as other ordinary sharesand gets a fixed dividends just likepreference shares.

But they are the last to receive both asregards dividends and repayment ofcapital.


22/57

Special provision regarding to

application and allotment of shares

Certain restriction on public companies

regarding allotment of shares, may be

discussed under the following heads:

When no public offer is made

When public offer was made


23/57

When no public offer is made

Where a public company having a share

capital does not offer shares to the public,

it need not issue a prospectus. In such

case it shall not proceed to allot sharesunless at least three days before the first

allotment it has filed with the registrar for

registration a statement in lieu ofprospectus.


24/57

When public offer is made

In case when public company offers

shares to the public for subscription, the

provisions relating to allotment may be

studied under the following heads:

First allotment of shares

Subsequent allotment of shares


25/57

First allotment of shares

A public company can make the first allotmentonly after two years of the formation of thecompany, and should comply with certainrestrictions:

Registration of the prospectus

Minimum subscription

Application money

Effect of irregular allotment Opening of subscription list

Shares to be dealt in on a stock exchange


26/57

Subsequent allotment of shares

In case of subsequent allotment of sharesOffered to the public for subscription by apublic company, all the special provisions

applicable to first allotment of sharesdiscussed above apply, except theprovision relating to:

Minimum subscription [sec, 69(1)], and

Deposit of application money in aschedule bank


27/57

Issue of shares

Shares can be issued at par

Shares can be issued at premium

Shares can be issued at discount


28/57

Share certificate

Every person whose name is entered as amember of a company has a right to receive acertificate of his share.

A share certificate shall be under the seal of the

company and shall specify: The shares to which it relates

The amount paid up thereon

The name, address, and occupation of the share

holder. Should be signed by atleast 2 directors and

secretary.


29/57

Share warrant

A share warrant is a document issued by apublic company stating that its bearer isentitled to the shares specified therein.

A public company limited by shares mayconvert its fully paid-up shares into sharewarrants.

Advantage of issuing share warrants isthat shares can be transferred by meredelivery of warrant.


30/57

Transfer and Transmission

of Shares


31/57

General Norms for Processing of Transfer

Norms for processing of transfer

Norms for objection


32/57

Procedure to be followed by

Companies

Issue Receipt / acknowledgement

Use the prescribed format of covering

letter

bear a unique serial number

Must affix date receipt stamp

Shall return share certificates and transferwith prescribed time of one month


33/57

Not impound certificates

Dispatch after realization of the stockinvest

Ensure adequate security marks

Signature difference- Original transfer deed

- Original Certificate

- Original objection memo with thereason


34/57

CAPITAL

In order to finance its activities, a company

needs capital which is raised by a public

company by the issue of a prospectus

inviting deposits or offers for shares anddebentures from the public .


35/57

SHARE CAPITAL

DEFINITIONShare Capital is the capital raised

by a company by the issue of

shares.


36/57

CLASSES OF

CAPITAL NOMINAL OR AUTHORISED OR REGISTERED

CAPITAL

ISSUED CAPITAL

SUBSCRIBED CAPITAL

CALLED-UP CAPITAL UNCALLED CAPITAL

PAID-UP CAPITAL

REVERSED CAPITAL

FIXED OR BLOCK CAPITAL WORKING OR CIRCULATING CAPITAL


37/57

NOMINAL,AUTHORISED OR

REGISTERED CAPITAL

This is the sum stated in the memorandum ofassociation as the capital of the company.

Maximum amount which the company isauthorized to raise by issuing shares.

Also known as registered capital.

EG: Nominal capital may be Rs 10,00,000 divided

into 1,00,000 equity shares of Rs 10 each


38/57

ISSUED CAPITAL

It is the part of the authorized or nominal

capital which the company needs for the

time being and has been issued for

PUBLICSUBSCRIPTION

EG: out of the authorized capital of Rs10,00,000, thecompany may decide to issue for public subscription onlyRs 6,00,000 divided into 60,000 equity shares


39/57

SUBSCRIBED CAPITAL

The amount of the issued capital which

has been taken up by the public is known

as the SUBSCRIBED CAPITAL

EG: out of 60,000 equity shares issued forsubscription, only 50,000 shares maybe

taken up by public. Subscribed capital willbe 5,00,000 shares of Rs 10 each


40/57

CALLED UP CAPITAL

The company does not need the full

nominal or face value of its subscribed

capital in which case it calls only the part

of the face value

EG: If the company decided to call up Rs. 5

per share out of its nominal value ofRs.10


41/57

UNCALLED CAPITAL

The difference between the subscribed

capital and the called up capital is known

as UNCALLED CAPITAL

EG: The subscribed capital is Rs. 5,00,000,

the called up capital is Rs. 2,50,000

Thus uncalled capital is Rs 2,50,000


42/57

PAID-UP CAPTAL

Often, some of the subscribers for shares do not

pay the full amount called up for them, Therefore

the amount actually paid by the shareholders is

known as paid-up capital.

EG: If out of the called up capital of Rs.

2,50,000 the paid-up capital is Rs. 2,40,000,

the un-paid capital will be Rs. 10,000


43/57

RESERVED CAPITAL

It is the part of the capital of a company.

Which shall not be called up except at the

time of winding up of the company.


44/57

FIXED OR BLOCK CAPTAL

It is that part of the capital which isinvested in fixed assets which areintended to be kept in business more or

less permanently.

EG: Investment made in land and building,

plant and machinery, is fixed capital

O G O C C G


45/57

WORKING OR CIRCULATING

CAPITAL

This capital consists of assets

manufactured or acquired for sale at profit

Debentures


46/57

DebenturesThe most usual form of borrowing by a

company

is by the issue of debentures. According

to sec.2(12) debenture includes

debenture stocks, bonds and any other

securities of a company whetherconstituting a charge on the assets of the

company or not.

Debenturemeans a document which eithercreates a debt or acknowledges it, and any

document which fulfills either of these

conditions is a debenture.


47/57

Characteristic features of debenture

It is issued by a company and is usually in

the form of a certificatewhich is an

acknowledgement of indebtedness

It is issued under the companys seal. It

need not, however, be necessarily under

the companys seal.

It is one of series issuedto a number of

lenders.


48/57

It usually specifies a particular period or

date as the date of repayment

It generally creates a charge on the

undertaking of the company or some parts ofits property ; but there may be debentures

without any such charge.

A debenture holder does not have any right

to votein the company meetings.


49/57

Classes of debentures

Negotiability

Security

Permanence

Convertibility

Priority

Cl ifi ti di t


50/57

Classification according to

negotiability

Bearer debenture : - These debentures

also known as unregistered debentures,

are payable to its bearer. These are

regarded as negotiable instruments andare transferable by delivery.

Registered debentures : - These are the

debentures which are payable to theregister holders. These are transferable in

the manner specified in the conditions

endorsed thereon.


51/57

Classification according to security

Secured debentures : - Debentures which

create some charge on the property of the

company. The charge may be a fixed

charge or a floating charge

Unsecured or naked debenture :-

Debentures which do not create any

chargeon the assets of the company. Theholders of these debentures like ordinary

unsecured creditors may sue the company

for recovery of the debt.


52/57


permanenceRedeemable debentures :- Debentures are

usually issued on the condition that theyshall be redeemed after a certain period.

They may be re-issued after redemption inaccordance with the provisions of section.121.


53/57

Irredeemable debentures :- A debenturewill be treated as irredeemable whereeither there is no period fixed for

repayment of the principal amount orrepayment of it is made conditional on thehappening of an event which may nothappen for an indefinite period or may

happen only in certain specified andcontingent events.

Cl ifi ti di t


54/57


convertibility

Convertibility debentures :- These

debentures give an option to the holders to

convert them into preference or equity

sharesat stated rates of exchange, after acertain period. If the holders exercise the

right of conversion, they cease to be

lenders to the company and becomemembers instead.


55/57

Non-convertible debentures:- These

debentures do not give any option to their

holders to convert them equity shares. They

are to be duly paid as and when they aremature.


56/57

Classification according to priority

First debentures :- These are the

debentures which are to be repaid in

priority to other debentures which may be

subsequently issued.

Second debentures :- These are the

debentures which are to be paid after thefirst debentures have been redeemed.


57/57

Debentures with Pari Passu clause

Debentures are usually issued in a series

with a pari passu clause. In such a case

they are to be discharged rateable, though

issued at different and varying times. In theevent of a deficiency of assets to satisfy

the whole debt secured by the issue of

debentures, they will abate proportionately.

Presentation2company Law

Documents

Transcript of Presentation2company Law