Shares COMPANY LAW I ESE

Kinds of share capital (S.43)

●       Equity share capital: with or without differential rights as to dividend, voting, or otherwise, as prescribed.

●       Preference share capital: carries a preferential right to a fixed dividend and to repayment of capital on winding up, ahead of equity — but generally limited/no voting rights except on matters directly affecting preference rights, or if dividend is in arrears (as prescribed).

Nature of shares (S.44)

●       A share is movable property, transferable in the manner provided by the Articles.

Share certificate (S.46)

●       prima facie evidence of title; a company may also issue shares in dematerialised form through a depository.

Allotment

●       Must follow proper offer/application; minimum subscription rules for a public offer; return of allotment to be filed with the ROC; irregular allotment (e.g., before minimum subscription is received) can be voidable at the allottee's instance.

Calls on unpaid share capital must be made per

●       the Articles/Table F, uniformly on all shares of the same class, with proper notice.

Company may have a lien on partly-paid shares for unpaid calls, if

the Articles so provide.

Forfeiture: permitted only if and for

●       authorised by the Articles, for non-payment of a call, after a proper notice giving a further reasonable period to pay; forfeiture for any other ground is void. Forfeited shares may be reissued or otherwise disposed of.

Transmission

Operates by law — death, insolvency, or lunacy of a member

Transfer requires an

instrument of transfer (S.56)

Grounds for valid refusal to register a transfer (S.58):

●       non-compliance with S.56 (defective/unstamped instrument); transfer contravenes the law or the Articles (e.g. pre-emption/restriction clauses in a private company); sufficient cause (transferor's title in doubt, forged transfer). For public companies the power to refuse is narrower, must be exercised bona fide in the company's interest, and appeal against refusal lies to the Tribunal.

S.59

●       the Tribunal may order rectification where an entry is made/omitted, or made without sufficient cause, or default/delay occurs in giving effect to a transfer or transmission.

Nominal or authorized capital

The maximum amount of share capital that a company is authorized by its Memorandum of Association (MOA) to issue.