SHARE CAPITAL, STOCKS

AND SHARES

PRESENTED BY:
KOPAL JAIN
CHINDU S.
NEHA VALSRAJ
SHUBHRA RISHI
 SHARE CAPITAL

• CAPITAL RAISED THROUGH ISSUE OF SHARES.

• NOT A NECESSARY CONDITION FOR

INCORPORATION.

• MEMORANDUM MUST STATE THE AMOUNT OF

CAPITAL WITH WHICH THE COMPANY IS
REGISTERED.
 SHARE CAPITAL
• AUTHORISED CAPITAL: COMPANY AUTHORISED TO ISSUE BY
ITS MEMORANDUM OF ASSOCIATION.

• ISSUED CAPITAL: PART OF THE AUTHORISED CAPITAL OFFERED

TO PUBLIC FOR SUBSCRIPTION.

• SUBSCRIBED CAPITAL: PART OF ISSUED CAPITAL ALLOTTED.

• CALLED-UP CAPITAL: PART OF ISSUED CAPITAL CALLED-UP.

• PAID –UP CAPITAL: PART OF ISSUED CAPITAL BEEN PAID FOR

BY THE SHAREHOLDERS.

• UNCALLED CAPITAL: ISSUED CAPITAL NOT BEEN CALLED.

• RESERVE CAPITAL: UNCALLED CAPITAL CALLED UP ONLY IN

THE EVENT OF WINDING UP.
 SHARE CAPITAL
TYPES OF SHARE CAPITAL:

EQUITY SHARE CAPITAL:

ALL SHARES THAT ARE NOT PREFERENCE
SHARE CAPITAL.[SEC 85(2)].

PREFERENCE SHARE CAPITAL:

CARRY PREFERENTIAL RIGHTS AS TO:
1) PAYMENT OF DIVIDENDS.
2) REPAYMENT OF CAPITAL ON WINDING
UP. [SEC 85(1)]
 SHARES AND STOCKS
SHARES:
DEFINITION:
“AN INTEREST HAVING A MONEY VALUE
AND MADE UP OF DIVERSE RIGHTS SPECIFIED
UNDER THE ARTICLES OF ASSOCIATION.”

STOCKS:
AGGREGATE OF FULLY PAID UP SHARES.
 SHARES AND STOCKS
ARTICLES 36-39 OF
CONVERSION OF TABLE
SHARESA INTO STOCK:
[ARTICLES 36-39 OF TABLE A]

ORDINARY RIGHTS,
TRANFERABILITY
RESOLUTION PRIVELEGES,ETC
[ARTICLE 37]
[ARTICLE 36] [ARTICLE 38].
APPLICABILITY
OF TABLE A
[ARTICLE 39]
 SHARES AND STOCKS
DISTINCTION BETWEEN SHARES AND STOCKS
NOMINAL
NOMINAL VALUE
VALUE NO
NO NOMINAL
NOMINAL VALUE
VALUE

CAN
CAN BE
BE PARTLY
PARTLY PAID
PAID UP
UP ALWAYS
ALWAYS FULLY
FULLY PAID
PAID UP
UP

ALL
ALL SHARES
SHARES OF
OF EQUAL
EQUAL DENOMINATIONS
DENOMINATIONS CAN
CAN BE
BE OF
OF UNEQUAL
UNEQUAL AMOUNTS
AMOUNTS

SHARE STOCK
S S
CAN
CAN BE
BE ISSUED
ISSUED ORIGINALLY
ORIGINALLY CANNOT
CANNOT BE
BE ISSUED
ISSUED ORIGINALLY
ORIGINALLY

TRANSFERABLE
TRANSFERABLE ONLY
ONLY IN
IN ITS
ITS ENTIRETY
ENTIRETY TRANSFERABLE
TRANSFERABLE IN
IN ANY
ANY FRACTIONS
FRACTIONS
 SHARES AND STOCKS
TYPES OF SHARES
SHARES

PREFERENCE
SHARES

EQUITY
CUMULATIVE AND NON- PARTICIPATING AND NON CONVERTIBLE AND SHARESREDEEMA
NON-
CUMULATIVE PARTICIPATING CONVERTIBLE IRREDEE
 SHARES AND STOCKS
BONUS SHARES: WHEN LARGE AMOUNTS OF
RESERVES ARE ACCUMULATED WITH THE
COMPANY AND IT DECIDES TO DISTRIBUTE THESE
AMONG SHAREHOLDERS,IT MAY DECIDE TO ISSUE
SHARES FREE OF COST TO ITS EXISTING
SHAREHOLDERS REFERRED TO AS BONUS SHARES.
RIGHT SHARES:
THE RIGHT OF EXISTING SHAREHOLDERS TO RECEIVE
INVITATION TO OFFER SUBSCRIPTIONS TO THE
SHARES OF THE COMPANY IN THE
EVENT OF FURTHER ISSUE OF
CAPITAL.
APPLICATION AND ALLOTMENT OF SHARES
APPLICATION:
AN OFFER BY PROSPECTIVE SHARE
HOLDER OF A COMPANY TO TAKE SHARES.

ALLOTMENT:
DEFINITION:
THE SUPREME COURT EXPLAINED
ALLOTMENT OF SHARES AS “THE CERTAIN
NUMBER OF SHARES TO A PERSON.TILL EACH
ALLOTMENT THE SHARES DO NOT EXIST. IT IS
ON ALLOTMENT THAT SHARES COME INTO
EXISTENCE.”
 ALLOTMENT OF SHARES
GENERAL PROVISIONS REGARDING ALLOTMENT
PROPER AUTHORITY

REASONABLE TIME

COMMUNICATION

ABSOLUTE AND UNCONDITIONAL

REVOCATION
 ALLOTMENT OF SHARES
SPECIAL PROVISIONS REGARDING ALLOTMENT

CASE I : WHEN NO PUBLIC OFFER HAS BEEN

MADE.

CASE II : WHEN PUBLIC OFFER IS MADE.

WHEN
WHEN PUBLIC
PUBLIC
OFFER IS
OFFER IS MADE
MADE

ALLOTMENT OF
DEBENTURES

SUBSEQUENT
SUBSEQUENT FIRST
FIRST
ALLOTMENT OF
ALLOTMENT OF ALLOTMENT OF
ALLOTMENT OF
SHARES
SHARES SHARES
SHARES
 ALLOTMENT OF SHARES
SPECIAL PROVISIONS REGARDING ALLOTMENT
WHEN PUBLIC OFFER IS MADE:

1. FIRST ALLOTMENT OF SHARES:

REGISTRATIO MINIMUM
APPLICATION
N OF SUBSCRIPTIO
MONEY
PROSPECTUS N

EFFECT OF OPENING OF TO BE LISTED

IRREGULAR SUBSCRIPTIO ON STOCK
ALLOTMENT N LIST EXCHANGE

RETURNS AS
TO
ALLOTMENTS
MEMBERSHIP IN A COMPANY

MEMBERS:
PERSONS WHO COLLECTIVELY CONSTITUTE
THE COMPANY AS A CORPORATE IDENTITY.

DISTINCTION BETWEEN MEMBERS AND

SHAREHOLDERS:
●
● REGISTERED SHAREHOLDER IS A MEMBER
MEMBER ●
● LEGAL REPESENTATIVE OF A DECEASED
MEMBER IS NOT A MEMBER.

●
● REGEISTERED
REGEISTERED MEMBER
MEMBER MAY
MAY NOT
NOT BE
BE A
A SHAREHOLDER
SHAREHOLDER
SHAREHOLDER ●
● LEGAL
LEGAL REPRESENTATIVE
REPRESENTATIVE OF
SHAREHOLDER.
SHAREHOLDER.
OF A
A DECEASED
DECEASED MEMBER
MEMBER IS
IS A
A
 MEMBERSHIP IN A COMPANY
WHO CAN BE A MEMBER?

ANY PERSON WHO IS COMPETENT TO CONTRACT

[SEC11] MAY BECOME A MEMBER, SUBJECT TO THE
MEMORANDUM AND ARTICLES.CERTAIN PERSONS
MAY NOT BECOME THE MEMBERS OF THE COMPANY
AS PER ITS ARTICLES:
1) MINOR
2) INSOLVENT
3) PARTNERSHIP FIRM
4) FOREIGNER
5) COMPANY
MEMBERSHIP IN A COMPANY
HOW TO BECOME A MEMBER

MEMBERSHIP BY
MEMBERSHIP BY
APPLICATION AND
SUBSCRIPTION
REGISTRATION

MEMBERSHIP BY MEMBERSHIP BY
BENEFICIAL QUALIFICATION
OWNERSHIP SHARES
MEMBERSHIP IN A COMPANY
CESSATION OF A MEMBERSHIP

BY ACT OF PARTIES

TRANSFER FORFEITU SALE OF SURREND

OF RE OF SHARES ER OF
SHARES SHARES BY CO. SHARES
 MEMBERSHIP IN A COMPANY
RIGHTS AND LIABILITIES OF MEMBERS

RIGHTS:
1) STATUTORY RIGHTS
2) DOCUMENTARY RIGHTS
3) LEGAL RIGHTS

LIABILITIES:
THEY DEPEND ON THE NATURE OF THE
COMPANY WHICH COULD BE AS UNDER:
1)COMPANY WITH UNLIMITED LIABILITY
2)COMPANY LIMITED BY SHARES
3)COMPANY LIMITED BY GUARANTEE
 MEMBERSHIP IN A COMPANY

REGISTER OF MEMBERS
EVERY COMPANY SHALL KEEP A REGISTER OF
ITS MEMBERS WHICH SHOULD CONTAIN:
NAME,ADDRESS, NUMBER OF SHARES
OCCUPATION OF HELD BY EACH
EACH MEMBER MEMBER

DATE ON WHICH DATE ON WHICH

EACH MEMBER WAS ANY PERSON
REGISTERED AS A CEASED TO BE A
MEMBER MEMBER
 CALL ON SHARES
MEANING:
A CALL IS A DEMAND BY A COMPANY
ON ITS SHAREHOLDERS TO PAY THE WHOLE OR
PART OF THE BALANCE REMAINING UNPAID ON
EACH SHARE.
LEGAL PROVISIONS REGARDING CALLS:
RESOLUTION OF THE
BONAFIDE AND FOR THE
BOARD
BENEFIT OF THE CO.
[SEC 292(1)]

CALLS IN ADVANCE
UNIFORM BASIS [SEC 91]
[SEC 92]
 SHARE CERTIFICATE
EVERY PERSON WHOSE NAME IS ENTERED AS A
MEMBER IN THE REGISTER OF MEMBER OF THE
COMPANY HAS A RIGHT TO RECEIVE A CERTIFICATE
OF HIS SHARES.THE SHARE CERTIFICATE SHALL BE
UNDER THE SEAL OF THE COMPANY AND SHALL
SPECIFY:
1)THE SHARES TO WHICH IT RELATES
2)THE AMOUNT PAID UP THEREON
3)THE NAME OF THE HOLDER OF THE SHARES

IT SHALL BE SIGNED BY ATLEAST TWO

DIRECTORS AND A SECRETARY.

 SHARE CERTIFICATE
LIMITATION OF TIME FOR ISSUE OF
SHARE CERTIFICATES
THE COMPANY SHALL DELIVER SHARE CETIFICATES:
1)WITHIN THREE MONTHS OF ALLOTMENT.
2)WITHIN TWO MONTHS AFTER THE APPLICATION
FOR REGISTRATION OF TRANSFER SUCH SHARES.

OBJECT OF SHARE CERTIFICATE

A SHARE CERTIFICATE UNDER THE SEAL OF

THE COMPANY IS PRIMA FACIE EVIDENCE OF
THE TITLE OF THE MEMBER TO THE SHARES
SPECIFIED IN THE CERTIFICATE.
 SHARE WARRANT

MEANING:
A SHARE WARRANT IS A DOCUMENT ISSUED
BY A PUBLIC COMPANY STATING THAT ITS
BEARER IS ENTITLED TO THE SHARES
THEREON.

CONDITIONS FOR THE ISSUE OF SHARE

WARRANTS:
1)SHARES SHOULD BE FULLY PAID UP
2)ARTICLES SHALL AUTHORISE THE ISSUE
3)PRIOR APPROVAL OF CENTRAL GOVT. MUST
BE OBTAINED.
4)SHOULD BE ISSUED UNDER THE COMMON
SEAL OF THE COMPANY.
 FORFEITURE OF SHARES
MEANING:
DEPRIVING A PERSON OF HIS PROPERTY AS A
PENALTY FOR SOME ACT OR OMISSION.

THE CO. MAY FORFEIT THE SHARES OF A

SHAREHOLDER IF FOLLOWING CONDITIONS
ARE SATISFIED:

IN ACCORDANCE WITH NOTICE PRIOR TO

THE ARTICLES FORFEITURE

RESOLUTION OF THE
GOOD FAITH
BOARD
 FORFEITURE OF SHARES

EFFECT OF FORFEITURE:

CESSATION OF CESSATION OF
MEMBERSHIP LIABILITY
 SURRENDER OF SHARES
MEANING:
WHEN A SHAREHOLDER OF A COMPANY VOLUNTARILY
GIVES UP HIS SHARES IN FAVOUR OF THE COMPANY,
HE IS SAID TO HAVE SURRENDERED THEM TO THE
COMPANY.

VALIDITY OF SURRENDER OF SHARES:

1) IN CASE OF PARTLY PAID SHARES WHERE
FORFEITURE IS CALLED FOR.
2)IN CASE OF FULLY PAID SHARES WHERE
THEY ARE EXCHANGED FOR NEW SHARES.
 TRANSFER OF SHARES
PROVISIONS OF ACT RELATING TRANSFER

1)TRANSFER NOT TO BE REGISTERED EXCEPT ON

PRODUCTION OF INSTRUMENT OF TRANSFER [SEC 108]
a) TRANSFER DEED
b)PRESCRIBED FORM
c)PERIOD FOR DELIVERY OF TRANSFER DEED

2)TRANSFER BY LEGAL REPRESENTATIVES [SEC 109]

3)APPLICATION FOR TRANSFER [SEC 110]

4)POWER TO REFUSE REGISTRATION AND APPEAL

AGAINST REFUSAL.[SEC 111]
 TRANSFER FOR SHARES
POWER OF DIRECTORS TO REJECT TRANSFER

THERE CAN BE TWO SITUATIONS:

1)WHERE THE ARTICLES CONTAIN NO CLAUSE

ALLOWING THE DIRECTORS TO REFUSE THE
TRANSFER.

2)WHERE THE ARTICLES CONTAIN A CLAUSE

ALLOWING DIRECTORS TO REFUSE THE
TRANSFER.
 TRANSFER OF SHARES
CERTIFICATION OF TRANSFER
MEANING:

A STATEMENT BY A COMPANY THAT CERTAIN

DOCUMENTS HAVE BEEN DELIVERED TO THE
COMPANY FOR THE PURPOSE OF TRANSFER
OF SHARES.

IT IS A REPRESENTATION BY THE COMPANY

TO ANY PERSON ACTING ON THE FAITH OF
SUCH DOCUMENTS SHOW PRIMA FACIE TITLE
TO THE SHARES IN THE TRANSFEROR’S NAME
IN THE INSTRUMENT OF TRANSFER.
 TRANSFER OF SHARES
FORGED TRANSFER:
AN INSTRUMENT OF TRANSFER ON WHICH
SIGNATURE OF THE TRANSFERROR IS FORGED.

BLANK TRANSFER:
TRANSFER OF SHARES EXCECUTED WITHOUT
THE NAME OF THE TRANSFEREE BEING FILLED
IN THE TRANSFER FORM OR DEED.

GIFT OF SHARES:
COMPLETE AS SOON AS THE SHARES ARE
HANDED OVER TO THE PERSON TO WHOM THEY
ARE GIFTED ALONG WITH A BLANK TRANSFER
FORM DULY SIGNED BY THE DONOR.
 TRANSFER OF SHARES
RESTRICTIONS ON THE TRANSFER OF SHARES
[SECS 108-A – 108-I]

1)RESTRICTION ON ACQUISITON OF CERTAIN SHARES.

2)RESTRICTION ON TRANSFER OF SHARES.

3)RESTRICTION ON THE TRANSFER OF SHARES OF

FOREIGN COMPANIES.

4)POWER OF THE CENTRAL GOVERNMENT TO DIRECT

COMPANIES NOT TO GIVE EFFECT TO THE TRANSFER.
 TRANSFER OF SHARES
RESTRICTIONS ON THE TRANSFER OF SHARES
[SECS 108-A – 108-I]
5)TIME WITHIN WHICH REFUSAL IS TO BE
COMMUNICATED.

6)EXEMPTIONS

7)APPLICABILITY OF PROVISIONS OF SECS 108-F

8)CONSTRUCTION OF CERTAIN TERMS USED IN

SECS 108-A – 108-G
 TRANSMISSION OF SHARES

MEANING:
THE OWNERSHIP IN SHAREHOLDINGS OF A
SHAREHOLDER IS TRANSFERRED TO ANOTHER
PERSON BY OPERATION OF LAW AND NOT ON
ACCOUNT OF THE WILL OF THE SHAREHOLDER.
 ALTERATION OF SHARE
CAPITAL
THE ALTERATION OF SHARE CAPITAL CAN BE
DONE AS FOLLOWS:
• INCREASE NOMINAL SHARE CAPITAL BY INCREASING
SHARES.
• CONSOLIDATE AND DIVIDE THE SHARE CAPITAL INTO
SHARES OF LARGE AMOUNT.
• CONVERT FULLY PAID UP SHARES INTO STOCKS AND
VICE VERSA.
• SUB DIVIDE THE SHARES OR ANY OF THEM INTO
SHARES OF SMALLER AMOUNT.
• CANCEL SHARES THAT HAVE NOT BEEN
TAKEN UP AND ALSO DIMINISH THE AMOUNT OF
• AUTHORISED CAPITAL BY THE AMOUNT
NOT TAKEN UP.
 REDUCTION OF CAPITAL
THE PRINCIPLE ENFORCEABLE BY LAW THAT NO
ACTION RESULTING IN THE REDUCTION OF CAPITAL
SHOULD BE PERMITTED UNLESS:
• UNDER STATUTORY AUTHORITY OR BY FORFEITURE
• IN STRICT ACCORDANCE WITH THE PROCEDURE,IF
ANY,LAID DOWN IN THAT BEHALF IN THE ARTICLES
OF ASSOCIATION.
 REORGANISATION OF CAPITAL
THE REORGANISATION OF CAPITAL SHALL
BE DONE AS FOLLOWS:

1)BY CONSOLIDATION OF SHARES OF DIFFERENT

CLASSES.
2)BY DIVISION OF SHARES OF ONE CLASS INTO
INTO SHARE OF DIFFERENT CLASSES.
3)BY BOTH THESE METHODS [SEC 390(b)].
THANK

YOU……