Share Capital And Debentures – Company Registration in Coimbatore


Share capital and debentures:

Kinds of share capital:

The share capital of a company limited by shares shall be of two kinds, namely,

Equity share capital-

With voting rights, or

With differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed, and

Preference share capital;

Provided that nothing contained in this act shall affect the rights of the preference shareholders who are entitled to participate in the proceeds of winding up before the commencement of this act.

Explanation – For the purposes of this section-

Equity share capital, with reference to any company limited by shares, means all share capital which is not preference share capital;

Preference share capital refers to any company which is limited by shares means the part of the issued share capital of a company which carries or would carry a preferential right with respect to:

Payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income tax; and

In case of winding up, repayment or repayment of capital or the amount of share capital paid up or deemed to have been paid up. Preferential right to the payment of any fixed premium or a premium on a fixed scale that has been specified in the memorandum or articles of the company.

A capital amount may be deemed to be the preference capital, in spite of that, it has been entitled to either or both of the following rights, namely;

That in respect of dividends, in addition to the preferential rights to the amount specified in sub-clause (a) of clause (ii), whether fully or to a limited extent, it has a right to participate, with capital which is not entitled to the preferential right aforesaid

That in respect of capital, in addition to the preferential right to the repayment, on a winding up, of the amount specified in sub-clause (b) of clause (ii0, it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.

Nature of shares or debentures:

The debentures or shares of any member in a company may be movable property which is transferable in a manner provided by the articles of a company.

The numbering of shares:

The company will be having a share capital based on every share, which shall be distinguished by that distinctive member;

Nothing in this section may apply to a share which is held by a person whose name been entered as a holder of a beneficial interest in such share in the records of a depository.

Certificate of shares:

A certificate, issued under the common seal of the company, specifying the shares held by any person, shall be prima facie evidence of the title of the person to such shares.

A duplicate certificate of shares may be issued, if such certificate-

Is proved to have been lost or destroyed; or

Has been defaced, mutilated or torn and is surrounded by the company.

Notwithstanding anything contained in the articles of a company, the manner of an issue of a certificate of shares or the duplicate thereof, the form of such certificate, the particulars to be entered in the register of members and other matters shall be such as may be prescribed.

Where a share is held in depository form, the record of the depository is the prima facie evidence of the interest of the beneficial owner.

If a company with intent to defraud issues a duplicate certificate of shares, the company may be punishable with a fine amount which may not be less than five times the face value of the shares involved in the issue of the duplicate certificate but that may extend to ten times the face value of such shares or ten crore rupees whichever is higher and every officer of a company who is in default may be liable for action under the section 447.

Voting rights:

Subject to the provisions of section 43 and sub-section (2) of section 50,

Every member of a company limited by shares and holding equity share capital therein shall have a right to vote on every resolution placed before the company; and

His voting right on a poll shall be in proportion to his shares in the paid-up equity share capital of a company.

Every member on a company which is limited by shares and holding any preferences share capital with respect to such capital has a right to vote only on the resolution which has been placed before the company that actually affects the rights directly that is attached to his preference shares. Any resolution for winding up of a company or for reduction or repayment of its equity or preference share capital and the voting right on a poll may be in proportion to his share in the paid-up preference share capital and the voting right on a poll may be in proportion to his share in the paid-up preference share capital of a company;

Provided that the proportion of the voting rights of equity shareholders to the voting rights of the preference shareholders shall be in the same proportion as the paid-up capital in respect of the equity shares bears to the paid-up capital in respect of the preference shares:

The dividend with respect to a class of preference shares would not be paid for a period of two years or more, such class of preference shareholders will have a right to vote on all the resolution which has been placed before the company.

Variation of shareholders rights:

The share capital of a company has been divided into different classes of shares, the right