Share Capital
The
shares, debentures or other interest of any member in a company) shall be a
movable property, transferable in the manner provided by the articles of a Company.
Apart from shares or debentures, interest of any member referred to above
refers to right of membership in a guarantee Company. This provision applies to
both, a public company and a private company.
1. Shares
Share' means share on the
share capital of company and includes stock except where a distinction between
stock and shares is express or implied.
It represents the interest of the shareholder in the
company, measured for the purposes of liability and dividend, by a sum of
money. [Borland's Trustee v Steel Bros (1901) 1 Ch 279] It
is made up of the various rights contained in the contract. Shares are goods
under the Sale of Goods Act, 1930 [Section 2(7) of that Act;
Karunakaran v Krishna AIR 1943 Mad 74; Rupchand v Kamal
Kumar AIR 1955 NOC 348 (Cal)]. But they are not actionable claims. [Pranlal
Gajanand Thakur v Vasudev Ramchandra Shelat (1973) 43 Comp Cas 203]
Shares are movable property in India and they can be transferred in the manner
provided in the articles of the company. [Arjun Prasad v Central Bank
of India AIR 1956 Pat 32] Each share in a company having share capital must
be distinguished by its appropriate numbers. [Section 83]
Shares
are "goods" within the meaning of section 76 of the Indian Contract
Act. [Maneckji v Wadilal Sarabhai & Co. (1926) ILR 50
Bom 360: 30 CWN 890; Evans v Davis (1893) 2 Ch 216; Hazari
Mull v Satish (1918) ILR 46 Cal 331; Fazal v Mangaldas ILR
(1921) 46 Bom 489]
2. Distinction between
shares held as stock-in-trade and shares held as investment - tests - Circular
No. 4/2007, dated 15.06.2007
In
the case of CIT v Associated Industrial Development Company (P)
Ltd [(1971) 82 ITR 586], the Supreme Court observed that:
“Whether
a particular holding of shares is by way of investment or forms part of the
stock-in-trade is a matter which is within the knowledge of the assessee who
holds the shares and it should, in normal circumstances, be in a position to
produce evidence from its records as to whether it has maintained any
distinction between those shares which are its stock-in-trade and those which
are held by way of investment.”
In the case of CIT v H. Holck Larsen
[(1986) 160 ITR 67], the Supreme Court observed:
“The High Court, in our opinion,
made a mistake in observing whether transactions of sale and purchase of shares
were trading transactions or whether these were in the nature of investment was
a question of law. This was a mixed question of law and fact.”
“The
Authority for Advance Rulings (AAR) [(2007) 288 ITR 641], referring to the
decisions of the Supreme Court in several cases, has culled out the following
principles:—
(i) Where a company purchases and sells
shares, it must be shown that they were held as stock-in-trade and that
existence of the power to purchase and sell shares in the memorandum of
association is not decisive of the nature of transaction;
(ii) the substantial nature of transactions,
the manner of maintaining books of accounts, the magnitude of purchases and
sales and the ratio between purchases and sales and the holding would furnish a
good guide to determine the nature of transactions;
(iii) ordinarily the purchase and sale of
shares with the motive of earning a profit, would result in the transaction
being in the nature of trade/adventure in the nature of trade; but where the
object of the investment in shares of a company is to derive income by way of
dividend etc. then the profits accruing by change in such investment (by sale
of shares) will yield capital gain and not revenue receipt.”
“Dealing
with the above three principles, the AAR has observed in the case of Fidelity
group as under:—
We shall revert to the aforementioned principles. The
first principle requires us to ascertain whether the purchase of shares by a
FII in exercise of the power in the memorandum of association/trust deed was as
stock in-trade as the mere existence of the power to purchase and sell shares
will not by itself be decisive of the nature of transaction. We have to verify
as to how the shares were valued/held in the books of account i.e. whether they
were valued as stock-in -trade at the end of the financial year for the purpose
of arriving at business income or held as investment in capital assets. The second
principle furnishes a guide for determining the nature of transaction by
verifying whether there are substantial transactions, their magnitude, etc.,
maintenance of books of account and finding the ratio between purchases and
sales. It will not be out of place to mention that regulation 18 of the SEBI
Regulations enjoins upon every FII to keep and maintain books of account
containing true and fair accounts relating to remittance of initial corpus of
buying and selling and realizing capital gains on investments and accounts of
remittance to India for investment in India and realizing capital gains on
investment from such remittances. The third principle suggests that ordinarily
purchases and sales of shares with the motive of realizing profit would lead to
inference of trade/adventure in the nature of trade; where the object of the
investment in shares of companies is to derive income by way of dividends,
etc., the transactions of purchases and sales of shares would yield capital
gains and not business profits.”
“CBDT also wishes to emphasise that it is possible for a
tax payer to have two portfolios, i.e., an investment portfolio
comprising of securities which are to be treated as capital assets and a
trading portfolio comprising of stock-in-trade which are to be treated as
trading assets. Where an assessee has two portfolios, the assessee may have
income under both heads, i.e., capital gains as well as business income.
“Assessing officers are advised that the above principles
should guide them in determining whether, in a given case, the shares are held
by the assessee as investment (and therefore giving rise to capital gains) or
as stock-in-trade (and therefore giving rise to business profits). The
assessing officers are further advised that no single principle would be
decisive and the total effect of all the principles should be considered to
determine whether, in a given case, the shares are held by the assessee as
investment or stock-in-trade.”
TYPES OF SHARE CAPITAL
In
terms of the provisions of section 86 of the Act, the share capital of a
company limited by shares shall be of two kinds only, namely:—
(a)
equity share capital—
(i)
with voting rights; or
(ii) with differential rights as of dividend,
voting or otherwise in accordance with such rules and subject to such
conditions as may be prescribed.
(b)
preference share capital.
Equity share capital means all such share capital,
which is not preference share capital.
EQUITY SHARES
3.
Equity share capital and rights attached thereto
Section 86(a) of the Act provides that the equity
share capital may be in two categories viz:— (i) with voting
rights; or
(ii) with differential rights as to dividend,
voting or otherwise in accordance with such rules and subject to such
conditions as may be prescribed.
The
word 'otherwise' in the view of Department of Company Affairs may include, inter
alia rights as to participating in surplus in the events of winding up,
mode of repayment, etc.
The
Central Government has prescribed rules vide Notification No. GSR
167(E), dated 9-3 -2001 namely Companies (Issue of Share Capital with
Differential Voting Rights) Rules, 2001. (Appendix 1 & 2)
4. Equity shares do not vest in their holders following
rights
In
case if a company has equity and preferential capital, both, the holder of
equity shares does not have the following rights:—
(a)
Preferential right in respect of payment of dividend;
(b)
Preferential right in respect of payment of capital in the event of
liquidation of a company.
In
such cases the preferential shareholders shall get preferential rights in the
payment of dividend, if any and payment of capital if company goes into
liquidation.
The Patna High Court has held that before there can be
preference shares, there must be at least two classes of dividends governing
two such classes of shares in which one class is given a preferential treatment
over the other. The effect of section 85 read with section 86 is that all share
capital which is not preference share capital is equity share capital and, for
the purpose of being brought within the purview of preference share capital,
the conditions to be satisfied are that as respects dividends, it carries or
will carry a preferential right to be paid a fixed amount or at a fixed rate
and as respects capital, it carries or will carry, on a winding up or repayment
of capital, a preferential right to be repaid the amount of the capital paid. [Bihar
State Financial Corporation v CIT (1976) 46 Comp Cas 155 (Pat)]
EQUITY SHARES WITH DIFFERENTIAL VOTING RIGHTS
5.Issue
of Equity Shares with Differential Voting Rights
A company which proposes to issue equity shares with
differential voting rights has to comply with the requirements of the Companies
(Issue of Share Capital with Differential Voting Rights) Rules, 2001 and it has
to check the following points and must ensure that the company is eligible for
issuance of these shares:—
(a) A company limited by shares may issue equity
shares with differential rights as to dividend, voting or otherwise.
(b)
The following requirements shall be fulfilled:—
— the company has distributable
profits in terms of section 205 for preceding 3 financial years preceding the
year in which it was decided to issue such shares;
— the company has not defaulted in
filing of annual accounts and annual returns for 3 financial years immediately
preceding the financial year of the year in which it was decided to issue such
share;
— the company has not failed to
repay its deposit or interest thereon on due date or redeem its debentures on
due date or pay dividend;
— the articles of association of
the company authorises the issue of shares with differential voting rights;
— the company has not been
convicted of any offence arising under Securities and Exchange Board of India
Act, 1992, Securities Contracts (Regulation) Act, 1956, Foreign Exchange
Management Act, 1999; and
— the company has not defaulted in meeting
investors' grievances.
(c) The company shall obtain the approval of the
shareholders in general meeting by passing resolution as per section 94.
(d) In the case of a listed company, the approval
of shareholders shall be obtained through postal ballot.
(e) The notice of meeting of the resolution shall
be accompanied by an explanatory statement stating:—
— the rate of voting right which the equity share capital
with differential voting right shall carry; — the scale or proportion to which
the voting rights of such class or type of shares will vary;
— the company shall not convert
its equity capital with voting rights into equity share capital with
differential voting rights and the shares with differential voting rights into
equity share capital with voting rights;
— the shares with differential voting rights shall not
exceed 25% of the total share capital issued; — that a member of the company
holding any equity share with differential voting rights shall be
entitled
to bonus shares, right shares of the same class;
— the holders of the equity shares
with differential voting rights shall enjoy all other rights to which the
holder is entitled to except right to vote as indicated above.
(f) A Register shall be maintained as required
under section 150 containing the particulars of differential rights to which
the holder is entitled.
SWEAT EQUITY SHARES
6. Issue of sweat equity shares
According
to section 79A, a company may issue sweat equity shares of a class of shares
already issued if the following conditions are fulfilled:—
(a) the issue of sweat equity shares is authorised
by a special resolution passed by the company in general meeting;
(b) the resolution specifies the number of shares,
current market price, consideration, if any, and the class(es) of directors or
employees to whom such equity shares are to be issued;
(c) 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.
If the equity shares of a company are not listed on any
recognised stock exchange, the sweat equity shares are issued in accordance
with the Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003 issued
by the Department of Company Affairs vide Notification No. GSR 923(E),
dated 4-12-2003 (See Appendix 3). As per section 79A of the Companies
Act, 1956 Sweat Equity Shares means equity shares issued by the company to
employees or directors 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 following provisions shall be kept in view by the
unlisted public company and private company before making issuance of sweat
equity shares in terms of section 79A(1)(b) and the Unlisted Companies
(Issue of Sweat Equity Shares) Rules, 2003:—
(a) a
special resolution shall be passed for the issue of sweat equity shares
(Appendix 4);
(b) the resolution shall specify the number of
shares to be issued, current market price, consideration, if any, and the
classes of directors or employees to whom such equity shares are to be issued;
(c) not less than one year should have elapsed
since the date on which the company was entitled to commence business;
(d) in the case of a company whose equity
shares are not listed on any recognised stock exchange, the sweat equity shares
shall be issued in accordance with the Unlisted Companies (Issue of Sweat Equity
Shares) Rules, 2003;
(e) necessary disclosures are made in the
explanatory statement to be sent to the shareholders as given under rule 4 of
the Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003;
(f) in the case of listed company, the promoters
to whom sweat equity shares are proposed to be issued shall not vote in such
resolution whereas there is no such restriction for an unlisted company;
(g) within 30 days of passing the special
resolution, e-Form 23 alongwith a copy of the special resolution as well as a
certified true copy of the explanatory statement and the receipted challan for
the requisite filing fees shall be filed with the Registrar of Companies.
6.1 Who may be allotted sweat equity shares
In
terms of the reading of section 79A and the prescribed rules, the following
persons may be issued the sweat equity shares:
(i)
The class or classes of directors or employees;
(ii) Whole-time director, Executive director and
the permanent employees working in India or abroad are considered as employees;
(iii)
Manager;
(iv)
Promoters;
(v)
Non-employee;
(vi) 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.
6.2 Promoters
There is no specific mention about the promoter being
eligible for sweat equity shares in section 79A, but both in SEBI Guidelines
and the Unlisted Companies (Issue of Sweat Equity Shares) Rules, 2003 promoters
have been given the right to get the sweat equity shares allotted.
7. Voting Rights on Shares
Section
87 of the Companies Act, 1956 deals with voting rights and following are the
provisions in this regard:—
(a) Voting rights of equity shareholders.—Every
member of a company limited by shares and holding any equity share capital
therein shall have a right to vote, in respect of such capital, on every
resolution placed before the company. [Section 87(1)(a)]
(b) Voting rights on poll.—Voting right of
every member on the poll shall be in proportion to his share of the paid up
equity capital of the company. [Section 87(1)(b)]
However, section 87 is not applicable in case of an
independent private company. [Section 90(2)]
PREFERENCE SHARE
A company limited by shares may, if authorised by its
Articles, issue preference shares. This means that a public company or a
private company may issue preference shares only if its Articles authorise to
do so.
8. Basic requirements of the preference shares
To qualify the preference share, it should fulfill
both the following requirements namely:—
(a) that it carries or will carry a preferential
right to be paid dividend of a fixed amount or at a fixed rate; and
(b) that it carries or will carry a preferential
right to repayment of capital paid up where or not there is any other
preferential right.
In
view of the above inclusion of a right to get dividend, whether cumulative or
non-cumulative is an inseparable element of preference shares and right to the
repayment of capital on winding up.
Dividends can be paid to cumulative preference
shareholders in winding up whilst assets of the company are being distributed,
and they rank in priority to other shareholders both as regards dividend and
capital. [Bombay Chlorine Products Ltd., In re (1965) 35 Comp Cas
282 (Bom)]
Where cumulative preference shareholders are entitled to
share in surplus of assets on winding up, they are not entitled to preference
for arrears of dividend unless there is specific provision for priority to such
arrears.
Where the preference shareholders are entitled to
participate in surplus assets on winding up, surplus assets will include
undistributed profits on the date of liquidation. [Dimbula Valley (Ceylon) Tea
Co. Ltd. v Laurie (1961) 31 Comp Cas 655 (Ch. D)]
9. Types of preference shares
Preference
shares may be classified into the various categories and may carry preferential
rights as per the provisions of the articles of the company.
1.
Cumulative preference shares.—In the case of
cumulative preference shares, the shareholders are entitled to receive
the dividend for a year which could not be paid due to losses or inadequate
profits in the subsequent year(s) whenever there are sufficient profit.
2.
Non-cumulative preference shares.—If
dividend on non-cumulative preference shares is not paid in any year on
account of losses or inadequate profits or otherwise, then the right to
dividend for that year is lost and cannot be carried over in subsequent years.
3.
Participating preference shares.—These types
of shares are entitled to participate in the surplus profit/dividend
besides, entitlement to fixed dividend or dividend at fixed rate.
4.
Non-participating preference shares.—These
types of shares are entitled to receive fixed amount of dividend or
dividend at fixed rate but do not have right to participate in surplus profits.
5.
Redeemable preference shares.—Section 80(1)
provides that a company limited by shares may, if so authorised by its
Articles, issue preference shares which are to be redeemed at the option of the
company.
6.
Irredeemable preference shares.—Section
80(5A) provides that a company shall not issue preference shares which
are either irredeemable or redeemable after the expiry of a period of 20 years
from the date of its issue.
7.
Convertible preference shares.—These
shares may be converted into equity shares as per the terms and
conditions of their issue.
8.
Non-convertible preference shares.—These
shares are not convertible into equity shares but have the preferential
rights to payment of capital in the event of liquidation of the company or
otherwise.
10.Guidelines for foreign
investment in preference shares
Ministry
of Finance has issued guidelines for foreign investment in preference shares,
which reads as follows:
“Foreign investment coming as fully convertible preference
shares would be treated as part of share capital. This would be included in
calculating foreign equity for purposes of sectoral caps on foreign equity,
where such caps have been prescribed.
Foreign investment coming as any other type of preference
shares (non-convertible, optionally convertible or partially convertible) would
be considered as debt and shall require conforming to ECB guidelines/ECB caps.
Any foreign investment as non-convertible or optionally
convertible or partially convertible preference shares as on and up to today
(30/4/2007) would continue to be outside the sectoral cap till their current
maturity.
Issue of preference shares of any type would continue to
conform to the guidelines of RBI/SEBI and other statutory bodies and would be
subject to all statutory requirements. [AP (DIR Series) Circular No. 73, dated
8-6-2007]”
11. Voting rights of preference shareholders
Section 87(2)(a) provides that every member of a
company limited by shares and holding any preference share capital therein
shall have a right to vote in respect of such share capital, on every
resolutions placed before the company which directly affect the rights attached
to his preference shares.
It is only if the dividend due on cumulative preference
shares remains unpaid for a aggregate period of not less than two years
preceding the date of commencement of meeting that a cumulative preference
shareholder gets the right to vote on all resolutions. [Hotel Queen Road
(P) Ltd. v Hill Crest Reality Sdn. Bhd. (2006) 68
SCL 197 (Del)]
If
voting is done by way of poll then preference shareholders will have right to
vote in proportion to their shares of the total paid up share capital of the
company.
The
voting right shall be in the same proportion as the capital paid up, in respect
of the preference shares bears of the total paid up equity capital of the
company.
Explanation of section 87(2)(a) provides
that any resolution for winding up the company or for repayment or
reduction of its share capital shall be deemed directly to affect the rights
attached to preference shares within the meaning of this clause.
However,
as per section 90, provisions of sections 85 to 89 are not applicable to a
private company as such.
12. Circumstances when preference shareholder can vote
on all resolutions
Every member of a company limited by share, holding any
preference share capital therein shall, in respect of such capital shall be
entitled to vote on every resolution placed before the company at any meeting,
if the dividend due on such capital or any part of such dividend has remained
unpaid for a specified period, which differs in respect of cumulative and
non-cumulative preference shares as under:—
(a) Cumulative preference shares.—In
the case of cumulative preference shares, if the dividend due on such shares in
respect of an aggregate period of not less than two years proceeding the date
of commencement of the meeting has remained unpaid. [Section 87(2)(b)(i)]
(b) Non-cumulative preference shares.—In
the case of non-cumulative preference shares, if the dividend due on such
capital or any part of such dividend has remained unpaid either in respect of a
period of at least 2 years ending with the expiry of the financial year
immediately preceding the commencement of the meeting or in respect of an
aggregate period of at least 3 years comprised in 6 years ending with the
expiry of the financial year immediately preceding the date of commencement of
the meeting. [Section 87(2)(b)(ii)]
(c) Any resolution for winding up the
company or for repayment or reduction of capital shall also be deemed directly
to affect the rights attached to the holders of the preference shares. When
such resolutions are proposed in a meeting, the holders of preference shares
shall have voting rights as in the case of holders of equity shares.
13. Period for redemption of preference shares
Section
80(5A) of the Act provides that w.e.f. 1-3-1997, a company cannot issue
preference shares which is irredeemable or redeemable after the expiry period
of 20 years from the date of its issue.
If a company fails to comply with the provisions of
section 80A, the company, and every officer of the company who is in default,
shall be punishable with fine which may extend to Rs. 10,000 for every day
during which such default continues and every officer of the company in default
shall be punishable for a term which may extend to 3 years and shall also be
liable to fine.
14. Requirement for redemption of shares
Section
80(1) provides conditions for redemption of preference share which has to be
complied with by a company (Appendices 5 and 6):—
(2)
Only fully paid preference shares shall be redeemed.
(3)
The premium, if any, payable on redemption shall be
provided out of profits or out of the company's security premium account,
before the shares are redeemed.
(4)
Where any preference shares are redeemed out of
profits, a sum equivalent to the nominal value of the shares redeemed shall be
transferred to the capital redemption reserve fund.
15.Alteration of rights of
holders of preference shares
Section 106 of the Act provides that where the share
capital of a company is divided into different classes of shares, the rights
attached to may be varied either with the consent in writing of the holders of
not less than three-fourth of the issued shares of that class or with the
sanction of a special resolution passed at a separate meeting of the holders of
the issued shares of that class. (Appendix 5)
Variation of rights of a class of shareholders can be
effected either by consent or by special resolution; it is not necessary that
the consent given should be further confirmed by a special resolution. [Rampuria
Cotton Mills Ltd., In re (1959) 29 Comp Cas 85 (Cal)]
Accordingly, where there are equity shares and preference
shares in a company the rights attached to the preference shares, namely the
rate of dividend payable on such shares or the period of redemption can be
varied by passing a special resolution at a meeting of the holders of the
preference shares. The special resolution in respect of section 106 in a listed
company shall be passed by postal ballot. The variation can be made, provided
there is provision in the Articles or Memorandum or in the absence of any such
specific provision, the variation shall not be prohibited by the terms 'of the
issue of the shares. If the company has issued more than one series of
preference shares, each having different rights, each issue will belong to a
class and action shall be taken for each class separately.
15.1
Procedure for variation of rights of
shareholders
1.
Check the Memorandum and Articles for provision
relating to variation of rights.
2.
Where there is no provision in the Memorandum or
Articles, it should be ensured that the variation is not prohibited by the
terms of issue.
3.
If neither the Memorandum and Articles nor the terms of
issue permit variation of rights, then first take steps to alter the Memorandum
or Articles as the case may be to permit variation.
4.
Consider and approve the proposal at a meeting of the
Board.
5.
Intimate the particulars of the proposed change to the
stock exchange where the shares are listed. In terms of the listing agreement,
the company cannot make any change in the terms or nature of its securities
that are listed on the stock exchange without giving twenty-one days' prior
notice to the Exchange of the proposed change and making an application for
listing of the securities as changed, if so required by the Exchange.
6.
Separate class meetings will be called of preference
shareholders and equity shareholders. Where the variation affects only one
class, it is sufficient if the meeting of that class only is held. But it is
desirable, that the consent of the members belonging to the other class should
be taken, as their rights will automatically be varied by the proposed change.
7.
In convening the class meetings, the provisions if any,
in the company's Articles relating thereto, the provisions given in Annexure B
to the Companies (Central Government's) General Rules and Forms, 1956 and the
conditions prescribed by terms of issue, should be complied with to the extent
applicable.
8.
Special resolutions should be passed in regard to the
variation.
9.
If a company is a listed company, then special
resolution aforesaid is to be passed through postal ballot only.
10.
A general meeting will be convened to pass a special
resolution.
11.
E-Form 23 will be filed in respect of resolutions
passed in the class meetings as well as in the general meeting with the
Registrar electronically within 30 days of passing of resolution. [Section
192]
12.
Where the dissenting shareholders have made an application
to the court under section 107 of the Act, the company shall file a copy, of
the Court's order with the Registrar within 30 days of the service thereof on
the company, along with e-Form 21 of the General Rules.
13.
Particulars of variation should be noted in every copy
of the Memorandum and Articles. [Section 40]
16.Rights of dissentient
shareholders
Dissentient holders of the said shares, who did not vote
in favour of the resolution and who in the aggregate are holding not less than
10% of the said issued shares, may apply to the court within 21 days from the
date of passing resolution as per provisions of section 107 to cancel the
variation. In that case the variation shall not have any effect unless and
until it is confirmed by the court.
The decision of the court on any such application shall be
final. Copy of the order of the court shall be filed with the Registrar of
Companies within 30 days of the service of the order on the company. [Section
107]
16.1
Procedure to apply to the Court as
dissentient shareholders
1.
Ensure that the application to the High Court is made
by holders of not less than ten per cent of the issued shares of the class
being persons who did not consent or vote in favour of the resolution for the
variation. [Section 107(1)]
2.
Make the application to the High Court Bench of the
state in which the registered office of the company is situated.
3.
If the applicant is corporate shareholder, make sure
that the board resolution is passed authorizing the director, company secretary
or the officer of the company to submit an application to the High Court.
4.
Make the application by way of petition to the Court
within 21 days after the date on which the consent was given or the resolution
for variation was passed. [Section 107(2)]
5.
Ensure that the aforesaid petition is either made by
all the dissentient shareholders or by one or more of them on behalf of the
others.
6.
If the petition is made by one or more of them, the
letter of authority signed by the shareholders so entitled, authorising the
petitioner to present the petition on their behalf, shall be annexed to the
petition, and the names and addresses of all the said shareholders and the
number of shares held by each of them shall be set out in the schedule to the
petition. [Rule 66(1) of the Companies (Court) Rules, 1959]
7.
The petition shall set out the following:
(a)
particulars of registration and the share capital;
(b) the different classes of shares into which the
share capital of the company is divided and the rights attached to each class
of shares;
(c) the provisions of the memorandum or articles
authorising the variation of the rights attached to the various classes of
shares;
(d) the total number of shares of the class whose
rights have been varied, the nature of the variation made, and, so far as may
have been ascertained by the petitioner,;
(e) the number of shareholders of the class who
gave their consent to the variation or voted in favour of the resolution for
variation and the number of shares held by them;
(f) the number of shareholders who did not consent
to the variation or who voted against the resolution, and the number of shares
held by them;
(g) date or dates on which the consent was given or
the resolution was passed, and the reasons for opposing the variation. [Rule
66(2) of the Companies (Court) Rules, 1959]
8.
Petition shall be verified by an affidavit made by the
petitioner or by one of the petitioners, where there are more than one, and in
case the petition is presented by a body corporate, by a director, secretary or
other principal officer thereof; such affidavit shall be filed along with the
petition and shall be in Form 3. [Rule 21 of the Companies (Court) Rules, 1959]
9.
Affix requisite Court Fee Stamp on the petition before
filing according to the Schedule of the Court Fees Stamp Act.
10.
On receipt of the order of the Court, see that the
other company files the certified copy of the order electronically alongwith
e-Form 21 with Registrar within 30 days of obtaining the copy of the order.
11.
If the other company fails to file the order copy as
aforesaid, and if default is made in complying with the said requirement, the
other company and every officer of the company in default will be punishable
with fine of Rs. 500. [Section 107(5)]
17.Categories of rights or
benefits
In Cumbrian Newspapers Group Ltd v Cumberland
& Westmorland Herald Newspaper & Printing Co Ltd (1986) 2
All ER 816: (1986) 2 BCC 99, 227: (1986) BCLC 286: (1987) 2 Comp LJ 39 (Ch D),
the court identified three categories of the rights or benefits which
may be contained in articles of association of a company:
(a) First, the rights or benefits annexed to
particular shares such as voting rights, dividend rights and right to
participate in surplus assets on a winding up. If articles provide that
particular shares carry particular rights not enjoyed by the holders of other
shares, it is easy to conclude that such rights are class rights.
(b) Secondly, the rights or benefits, which
are conferred on individuals, not in the capacity of members but for ulterior
reasons connected with the administration of the company's affairs or the
conduct of its business. These may include right to be the company's solicitor
or the right to be the company's president. Eley v Positive
Government Security Life Assurance Company Ltd (1875) 1 Ex D 20: 45 LJ QB
58: 33 LT 743: 24 WR 252, affirmed in (1876) 2 Ex D 88. These are not class
rights.
(c) Thirdly, the rights or benefits that
although not attached to any particular shares, are none the less conferred on
the beneficiary in the capacity of member of the company. This includes the
right under the articles for a director's share to carry weighted votes on a
resolution to remove him; the right under the articles entitling every member
to sell his shares to the directors of the company at a fair valuation, and the
right under the Articles to appoint director so long as the member holds 10% of
the company's issued share capital. These are class rights.
18. Presentation of the share capital
A company has to disclose its share capital in the various
statements and returns viz Annual Return, Balance Sheet, Forms and
various applications to be submitted to various authorities from time to time.
It has to represent the status of share capital as per requirements, which may
be shown as under:
18.1 Authorised
The capital clause of the Memorandum of Association of a
company contains description of the authorised share capital. This is the
capital with which a company is to be registered originally or the increased
authorised share capital as the case may be. The company is required to pay
adequate registration fee to the concerned Registrar of Companies.
18.2 Issued
Issued
capital is a part of the authorised capital, which is offered for subscription
in form of shares of the company. It also includes share capital issued for
consideration otherwise than in cash.
18.3 Subscribed
It
is a part of the issued share capital, which has been subscribed by the public
in case of a public limited company and includes shares purchased by the
vendors.
18.4 Called up
It is the sum of total amount called on all shares
comprised in the issued and subscribed capital. If the full value of the shares
is called up on application then the subscribed capital and called up capital
will be the same.
18.5 Paid up
This consists of the amount actually paid up or credited
as paid up on the shares subscribed. Share premium received on issuance of
shares are not considered in the paid up capital and hence, it is separately
shown as share premium account in the reserves and surplus.
18.6 Uncalled
Uncalled
capital is a part of the subscribed capital, which has not been called up but
it may be called up in future.
18.7 Reserved
It
is that part of uncalled capital which company has decided to call on
liquidation of the company and is termed as reserved capital.
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