Concept of Share Capital, Small Shareholders’ Director Detail

Elearning4more - March 15, 2019
Meaning and kinds of shares, Classes, and Types of Shares
concept-of-share-capital

Download pdf click here

 Recommended: Tally Erp 9

      A company is formed with share capital. Share capital represents the total amount of shares subscribed by shareholders to serve as capital for the Company. No trading concern can run without capital. The main division of share capital are:

Lets earn unlimited money together by completing tasks on Roz Dhan daily.

  1. Authorized or Registered or Nominal Capital: The amount of capital with which the company is registered is called authorized capital or registered capital. It is the maximum amount which the company is authorized to raise by way of public subscription.
  2. Issued Capital: That portion of authorized capital which is offered to the public for subscription is called issued capital.
  3. Subscribed Capital: That portion of issued capital which has been taken up by the public or for which application is received from the public.
  4. Called up Capital: The amount on the share actually demanded by the company to pe paid is known as called up capital.
  5. Paid up Capital: That part of the called up capital which is actually paid up by the shareholders is known as paid up capital.
  6. Calls in Arrears: Calles in arrears represent the extent to which the shareholder has not paid the calls made thereon.
  7. Uncalled Capital: It is the amount remaining to be called on the shares actually issued to the public or the vendors.

What is Gratuity? How to calculate? Is Income Tax Exempted on Gratuity?



     Total capital of the company is divided into small parts. Each part is called a share. 
For Example: In a company the total capital of  RS. 5,00,000 is divided into 50,000 units of 
RS.10 each then each unit is called a share of RS.10 Share must be numbered so that be identified they are movable property and are transferable.

Classes of Share:
The following are the three classes of shares.
  1. Preference Shares
  2. Equity Shares (Ordinary Share)
  3. Deferred Shares   

1) Preference Shares: The part of the total capital of the Company which enjoys the preferential right is called preference shares. The preferential rights are: 

  • Payment of dividend at a fixed rate during the life of the company and
  • Return of capital on winding up of the company. 
  • Preference shareholders have the preferential right as to the payment of dividend and not the right to get the dividend. They get priority over equity shareholders when the dividend is declared. Preference shareholders have no voting right except in some cases.
  • Lets earn unlimited money together by completing tasks on Roz Dhan daily.

A) Cumulative preference shares: A preference share is cumulative preference shares when the arrears of dividend accumulate and paid first of all whenever dividend declared. At the time of liquidation arrears of dividend are not payable unless Article of Association provides in the respect.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.


B) Non-cumulative Preference Share: A non-cumulative preference share is the shares where the arrears of dividend do not accumulate. If no dividend is paid by the company in a particular year then it lapses.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.


C) Participating preference share: A participating preference share is a share which carriers that right of sharing profits left after paying preference and equity dividend at a fixed rate.
D) Non-participating preference shares: A Non-participating share is that share which does not carry the right of sharing in the surplus left after paying equity dividend.
E) Convertible and non-convertible preference share: is that which can be converted in equity shares. When a share cannot be converted into equity share than it is said to be non-convertible preference share.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

D) Redeemable shares come with an agreement that the company can buy them back at a future date - this can be at a fixed date or at the choice of the business. A company cannot issue only redeemable shares, so they must ensure that they also issue non-redeemable shares.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

2) Equity share (ordinary shares): Equity share are those which does not carry any special right, Dividend is paid only when profits are left paying preference dividend. As regards returns of capital an equity Shareholders is paid only preference shares Capital is paid in full. An equity share capital voting right.

 3) Deferred Share: A deferred share is that share where the payment of both dividend and capital made only after having paid to equity shareholders. They carry disproportionate voting right. These shares now can be issued by independent private companies only. No public company or private company can issue deferred shares.

  Also, Read


Also, Read

ISSUE OF SHARES AT A PREMIUM

     A Company may issue its shares for consideration more or less than their face value or nominal value When it issues shares for consideration more than its face value. It is known as issue

The rule relating to the issue of shares at a premium

     A company can issue shares at a premium, even if the Articles do not contain any provision in this respect, the issue of shares is governed by the following rules:

1)      An amount equal to the premium received on the shares be transferred to a separate account called “Share-Premium” A/C.” The amount of premium shall be treated as paid-up capital of the company and shall be governed by the provisional application to the paid-up capital of the company.

2)      The company shall apply the amount standing to the credit of “Share” premium A/C for the following purpose only:-

A)     For the issued of fully paid-up bonus shares to the members of the company
B)      For writing off the preliminary expenses of the company.
C)      For writing off the expenses of, or the commission paid or discount allowed, on any issue of shares or debenture of the company.
D)     For providing the premium payable on the redemption of any redeemable preference shares or debentures of the company.

     It may be noted that a company may charge different amount of premium from the different applications of share category of shares.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

What is Gratuity? How to calculate? Is Income Tax Exempted on Gratuity?


Also, Read

ISSUE OF SHARES AT A DISCOUNT

     A company may issue shares for a consideration less than its face value or nominal value.
Such an issue is known as the issue of shares at a discount. The difference between the face value
And the consideration ‘payable for the share, is the amount of discount allowed by the company.
The rule relating to the issue of shares at a discount:

1)      The shares must be of a class already issued.

2)      The issue of shares at a discount must be authorized by an ordinary resolution of the company, which shall specify the maximum rate of discount to be allowed thereon.

3)      The permission of the Company Law Board must be obtained for the issue of shares at a discount. However, it will not permit the company to allow a discount in excess of 10% of the face value of shares.

4)      One year must have elapsed since the date on which the company was entitled to commence business.

5)      The issue of shares at a discount must take place within 2 months of the date of the permission of the Company Law Board.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.



What is Gratuity? How to calculate? Is Income Tax Exempted on Gratuity? In Hindi also



Also, Read



Lets earn unlimited money together by completing tasks on Roz Dhan daily.


DISTINGUISH BETWEEN SHARE AND STOCK 



SHARE
STOCK
1)      A SHARE may be fully paid up or partly paid up.
2)      A share has a distinctive number.
3)      A company can issue shares at any time during its existence
4)      Shares can be transferred in round numbers.
5)      A share has a definite and uniform face value.
6)      Shares can be issued by the private and public company.
7)      A shareholder is a member of the company
     1)      A STOCK is always fully paid up.
     2)      A stock has no distinctive number.
     3)      A company can convert fully paid shares into stock.
     4)      Stock can be transferred in small fractions.
     5)      A stock has no definite and uniform face value.
     6)      Stock can be converted by the public company only.
     7)      A stockholder is not necessarily a member of the company


cLets earn unlimited money together by completing tasks on Roz Dhan daily.

   BUY-BACK OF SHARE

     A company can purchase its owns shares. A company can buy back shares out of free reserves, share premium and the proceeds of any other securities. A free reserve is that which is available for dividend.

Requirements to be complied with before buyback of shares:

1)      The Articles of an association shall authorize the company to buy back shares.
2)      A special resolution to this effect should be passed in general meeting.
3)      The amount should not be more than 25% of its total paid-up capital and free reserve.
4)      All such shares are fully paid up.
5)      The notice to pass special resolution should be given along with an explanatory statement containing:

A)     Full disclosure of material facts.
B)      A necessity for the buyback.
C)      The class security intended to be purchased under buy-back,
D)     The amount involved under the buyback
E)      The time limit for the completion of the buyback.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

What is Gratuity? In Hindi also


 Also, Read

Requirements to be complied with after buy-back.
1)      The share certificate should be destroyed after seven days of buyback of shares.
2)      After buyback company cannot issue the same kind of shares except:

a)      Other kinds of shares
b)      Bonus shares
c)       Sweet equity shares
d)      Converted preference shares or debentures into equity shares etc.

3)      The company should maintain a register and record there in the shares buy back the amount paid for the same and date of cancellation or destruction of shares.
4)      The return of buyback should be filled with Registrar of the company and SEBI within 30 days
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

Also, Read

ALLOTMENT OF SHARES

     Allotment of shares is an act of distribution the shares of the company to the persons in response to their application or as per contract. It is an act of the company by which the application become the holders of shares.

Allotment of shares is valid only when:

1)      The statutory conditions regarding allotment as per the Companies Act, and
2)      The provision of the Indian Contract Act, are fulfilled.
a)      Minimum Subscription Amount:- The minimum subscription amount prospectus must be raised.
b)      An amount payable on the application:- An amount not less than 5% of the nominal value of each share payable in cash at the time of application
c)       Deposit of application money:- The application money received must be deposited in a scheduled bank until Trading Certificate is obtained.
d)      Prospectus:- No allotment of the shares or debentures can be made until the prospectus is issued.
e)      A statement in lieu of prospectus:- If a company with a share capital does not issue prospectus, a statement in lieu of prospectus is to be filled with the Registrar.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

f)       Central Government Section:- If the issue of capital exceeds RS.25 Lakhs sanction of the 
Central Government must be obtained.

What is Gratuity? How to calculate? Is Income Tax Exempted on Gratuity?


PROCEDURE OF ALLOTMENT (Secretarial Work)

1)      Collection of Applications:- The secretary collects all the applications from the bankers and makes an entry in the Application and prepares allotment list.
2)      The basis of Allotment:- The secretary then places the list before the Board of Directors who will fix the basis of the allotment. Usually, a sub-committee is appointed to deal with the allotment work.
3)      Minimum Subscription:- The secretary will see that the minimum subscription amount is raised before the allotment of shares.
4)      Board Meeting:- At the Board Meeting, the resolution sanctioning the allotment is passed.
5)      Allotment Letter:- The Secretary issues the allotment letters to whom shares have been allotted.
6)      Letter of Regret:- The secretary Issues letters of regret to those to whom the shares have not been allotted. The application money is refunded to the applicants.
7)      Returns as to Allotment:- The secretary will see that return must be filled with the Registrar within 30 days of allotment
8)      Preparation of Share Certificate etc:- The secretary will see that the share certificates signed by at least two directors are issued to the members against allotment letters within 3 months of allotment. With the issue of the share certificate, the allotment procedure will be completed.

Lets earn unlimited money together by completing tasks on Roz Dhan daily.

CALLS

     A Call is a demand by a company from its shareholders to pays whole or the part of the balance remaining unpaid on each share. The company can demand this unpaid amount during its lifetime. Even on winding up, the liquidator can demand the unpaid amount of the shares. The application money and the allotment money paid in respect of share are not termed as calls. Where the due dates the installments on shares are stated in the prospectus, such installments also cannot be termed as a call.

FORFEITURE AND REISSUE OF SHARES

     The Companies Act has made no provision in respect of forfeiture of shares. A company, therefore, has no right to forfeit the shares unless it is expressly given in the Articles of Association.

Forfeiture of shares means compulsory termination of membership and confiscation of shares due to non-payment of any calls, installment or premium of shares.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

SURRENDER OF SHARES

     WHEN a Shareholder was voluntarily given up his shares to the company, he is said to have surrendered his shares to the company. There is not any provision in tCompaniesies Act or in respect of surrender of shares. But the Articles sometimes give power to directors to accept pt surrender of shares. When the shareholder is almost unable to pay future calls on his shares, the directors may accept such surrender of shares.  Surrender of shares is regarded as a short cut to forfeiture of shares. Every surrender of fully paid up shares involves a reduction of capital which is illegal except sanctioned by the court. Hence surrender can apply only to partly paid-up shares, and the company may accept in those cases only where forfeiture would be justified.

TRANSFER OF SHARES

A)     Selling of share is generally termed as the transfer of shares. Shares is movable property and the shareholder has a right to sell his shares. So the transfer takes place. Companies Act provide certain provision for transfer of shares. There are two types of transfer of shares one is full transfer and another one is the part transfer of shares. We shall discuss the full transfer first.
B)      Full Transfer of Shares: The total shares indicated by the share certificate are transferred at a time. It is called as the full transfer. In the process of transfer of shares, the ownership is also transferred from transferor to the transferee.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

TRANSMISSION OF SHARES

     Transfer of shares by the operation of law (application fo law) is called transmission of shares. The original shareholder's shares are transmitted only in case of death, insanity, and insolvency to the legal representative.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.


DEBENTURES
    A Company for its development may acquire to raise funds without increasing its share capital. The Company may invite the public to lend money for a fixed period. The debenture is an instrument in writing given by the company’s Assets and carrying a certain rate of interest. Debentures are generally repayable or irredeemable during the existences of the company.

Sec. 151 of the Companies Act, 2013
A listed company may have one director elected by such small shareholders in such manner and with such terms and conditions as may be prescribed.
Explanation.—For the purposes of this section “small shareholders” means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.
Rule 7 of Companies (Appointment and Qualification of Directors) Rules 2014
Small Shareholders’ Director
(1) A listed company, may upon notice of not less than one thousand small shareholders or one-tenth of the total number of such shareholders, whichever is lower, have a small shareholders’ director elected by the small shareholders:
Provided that nothing in this sub-rule shall prevent a listed company to opt to have a director representing small shareholders suo motu and in such a case the provisions of sub-rule (2) shall not apply for appointment of such director.
(2) The small shareholders intending to propose a person as a candidate for the post of small shareholders’ director shall leave a notice of their intention with the company at least fourteen days before the meeting under their signatures specifying the name, address, shares held and folio number of the person whose name is being proposed for the post of director and of the small shareholders who are proposing such person for the office of director:
Lets earn unlimited money together by completing tasks on Roz Dhan daily.


Provided that if the person being proposed does not hold any shares in the company, the details of shares held and folio number need not be specified in the notice:
(3) The notice shall be accompanied by a statement signed by the person whose name is being proposed for the post of small shareholders’ director stating –
(a) his Director Identification Number;
(b) that he is not disqualified to become a director under the Act; and
(c) his consent to act as a director of the company
(4) Such director shall be considered as an independent director subject to , his being eligible under sub-section (6) of section 149 and his giving a declaration of his independence in accordance with sub-section (7) of section 149 of the Act.
(5) The appointment of small shareholders’ director shall be subject to the provisions of section 152 except that-
(a) such director shall not be liable to retire by rotation;
(b) such director’s tenure as small shareholders’ director shall not exceed a period of three consecutive years; and
(c) on the expiry of the tenure, such director shall not be eligible for re-appointment.
(6) A person shall not be appointed as small shareholders’ director of a company if the person is not eligible for appointment in terms of section 164.
(7) A person appointed as small shareholders’ director shall vacate the office if –
(a) the director incurs any of the disqualifications specified in section 164;
(b) the office of the director becomes vacant in pursuance of section 167;
(c) the director ceases to meet the criteria of independence as provided in sub-section (6) of section 149.
(8) No person shall hold the position of small shareholders’ director in more than two companies at the same time:
Provided that the second company in which he has been appointed shall not be in a business which is competing or is in conflict with the business of the first company.
(9) A small shareholders’ director shall not, for a period of three years from the date on which he ceases to hold office as a small shareholders’ director in a company, be appointed in or be associated with such company in any other capacity, either directly or indirectly.
COMMENTS ON SECTION 151 OF THE COMPANIES ACT, 2013
Originally in Companies Act, 1956 there was no provision for small shareholders’ director but Companies (Amendment) Act, 2000 brought the provision relating to SSD in the Companies Act, 1956. Companies (Second Amendment) Bill 1999, which ultimately led to Companies (Amendment) Act 2000, contained provision for SSD (as proviso to section 252(1) of the Companies Act, 1956 i.e clause 122 of the bill) for specified class of public companies on mandatory basis but while passing this bill this provision got converted from mandatory to optional basis.
Purpose of this section was to protect the minority shareholders by having their director on the board of specified public companies but to some extent lost its relevance because of optional nature of provision (section 128 of Companies (Amendment) Act, 2000 inserted proviso under section 252(1)).
Under Companies Act, 2013 scope of this SSD provision has been restricted even more than earlier, as now section 151 of the Companies Act, 2013 (corresponds to proviso of section 252(1) of the Companies Act, 1956) is applicable only on listed companies and unlisted public companies are out of this provision. Earlier under the Companies Act, 1956, SSD provision was applicable on public companies have paid up capital of five crore rupees or more and having one thousand or more small shareholders.
Although in the Companies Act, 2013 has made one welcome change with regard to the number of small shareholders proposing candidature for SSD now 1000 small shareholders or 1/10th of the total number of such shareholders whichever is lower can propose a person for the post of small shareholders’ director. Earlier in Companies Act, 1956 there was the requirement of at least 1000 small shareholders who could have proposed candidature of SSD.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.

What is Gratuity? How to calculate? Is Income Tax Exempted on Gratuity?



Definition of small shareholders is same in both the Acts.
A listed company may have SSD on suo moto basis. (Refer proviso to sub-rule 1 of rule 7
 of Companies (Appointment and Qualification of Directors) Rules, 2014)
There is no requirement for the candidate to be a small shareholder or even shareholder of the concerned listed company.
A person cannot become SSD in more than 2 companies and the second company in which he has been appointed as SSD shall not be in a business which is competing or is in conflict with the business of the first company.
SSD‘s tenure shall not exceed a period of three consecutive years and after the expiry of the tenure, such director shall not be eligible for re-appointment.

The candidate shall not be disqualified under section 164 of the Companies Act, 2013 and after appointment vacate office if incurs disqualification u/s 164, section 167 got attracted and not independent as per section 149(6) of the Companies Act, 2013.
Lets earn unlimited money together by completing tasks on Roz Dhan daily.


 Also, Read 

Accounting For Managers, Basics of Accounting, Book-Keeping & Accountancy


Click on a link below to Read interesting topic English and Hindi

 

नीचे दिए गए लिंक पर क्लिक करें पढ़ें दिलचस्प विषय अंग्रेजी और हिंदी

 


1) Golden Rule of Accounting

2) | गोल्डन रूल्स ऑफ अकाउंटेंसी | लेखांकन के बेसिक नियम |

3) Material Telly.Erp9, How to create a Company in Telly.Erp9


4) TDS Rates / TDS Rate Chart for Financial Year 2018-19 or Assessment Year 2019-20, TCS RATE CHART FOR FY: 2018-19 (AY: 2019-20)


5) GST COMPUTATION & ACCOUNTING, What is GST Credit ?, Difference between GST Payable GST,IGST Tax Rate and Computation Credit?


6) What is GST in India? Goods & Services Tax Law Explained

 

भारत में GST ŕ¤•्या है? ŕ¤®ाल और सेवा कर कानून समझाया

 

7) Frequently Asked Questions On E-Way Bill

 

8) what are the objects of branch accounting


9) GST Rate reduced to 1% on affordable houses & 5% on others wef 01.04.2019


10) What is a Trademark ? Trademark Registration in India: FAQs


11) Important amendment in Direct Tax for AY 2020-21


12) How To Compute Input Tax Credit Under GST


13) Note on the preparation of GST Annual Return in Form GSTR-9 at GSTN porta


14) Reverse Charge Mechanism (RCM) Under GST


15) Advance Tax – How to make Advance Tax Payment?


16) Key Highlights of CGST / IGST (Amendment) Act, 2018


17) Form GSTR-9 (GST annual return)- How to file with FAQs


18) What is Gratuity? How to calculate? Is Income Tax Exempted on Gratuity?


19) What are shares and dividend?


20) Income Tax, Under सेक्शन में कितना बचा सकते हैं टैक्स


21) Meaning and Natures of a company, Commentary on Section 168 of Companies Act, 2013


22) Mutual Fund


23) The concept of Share Capital, Small Shareholders’ Director Detail

Meaning and kinds of shares, Classes, and Types of Shares

24) Accounting For Managers, Accounting Process


25) What are the final accounts


26) What is mutual funds? Hindi
म्यूचुअल फंड तब बनता है जब विभिन्न निवेशकों से एकत्रित पूंजी को कंपनी 

27) Accounting For Managers, Basics of Accounting, Book-Keeping & Accountancy


28) Company secretary, Duties of company secretary, Right, and Power of the Company Secretary


29) Membership of the company, Right, Duties, Responsibility and their Termination


30) Company Meetings, Essentials of a valid meeting, Notice of the Meeting, SPECIMEN OF NOTICE:


31) What is Gratuity How to calculate? Is Income Tax Exempted on Gratuity?

ग्रेच्युटी क्या है? ŕ¤—णना कैसे करें? ŕ¤•्या ग्रेच्युटी पर आयकर छूट है?


32) What is the RCM (Reverse Charge Mechanism) under GST?
आम तौर पर, ŕ¤®ाल या सेवाओं का आपूर्तिकर्ता आपूर्ति पर कर का भुगतान करता है।

33) Top 8 Ways To Start Investing Money

Types of Investments

Why investments?
Types of Investments in India
Where should you invest your money?
How should I plan my investments?


34)Financial management Aims & Objectives

35) Financial Analysis

 

36) Income Tax, Under Taxes can save in the section

 

37) Financial Control

 

38) Digital Marketing


39) The Value of Money


40) Investment and Capital Structure Decision


41) long and short term financing


42) Valuation Bonds and stock


43) Capital Budgeting


44) Management And Estimation of Working Capital


45) FINANCIAL SYSTEM IN INDIA


46) Indian Insurance Sector


47) FINANCIAL MARKETS IN INDIA AND ROLE


48) Capital Market in India


49) EQUATED MONTHLY INSTALLMENTS (EMI)

Lets earn unlimited money together by completing tasks on Roz Dhan daily.

Tags:

Post a Comment

6 Comments

  1. Rahul SinghAugust 10, 2019 at 1:29 PM

    I love reading this kind of content. i am sure those post is very helpful for everyone. filter papers

    ReplyDelete
  2. Rahul SharmaAugust 13, 2019 at 3:16 PM

    Awesome post appreciates your efforts and really enjoyed the style of your writing. thimbles

    ReplyDelete
  3. SRCAugust 14, 2019 at 11:48 AM

    I am sharing your blog, I am almost done with watching Dynasty, and it is a real good show to watch.
    java training institute in noida

    ReplyDelete
  4. The Luxury TrainsAugust 20, 2019 at 4:41 PM

    I will appreciate for sharing the post and discussing topic. This is really a great stuff for sharing. Thanks for sharing.
    deccan odyssey

    ReplyDelete
  5. AnonymousMay 23, 2021 at 5:44 PM

    You have good articles here! If anyone here is looking for a loan @ 2% rate in return to buy a home or other financing needs, I want you to contact Mr Pedro On pedroloanss@gmail.com When I was introduced to Mr. Pedro at the market watch seminar, I was entering the market as a first time buyer. Naturally,my needs were a bit different and I had loads of questions. Before he sent me my pre-approval letter, he called to speak with me about what it meant and what could change. He made himself available to me at pretty much any hour via email and texts. He was very responsive and knowledgeable. He’s also very straightforward. I explained to him what my expectations were in terms of closing time and other particulars. He said he would meet those expectations but he surpassed them. I closed so quickly my realtor and the seller of course were excited about that. But as a buyer I appreciated being walked through the process of Mr Pedro loan offer. From pre-approval to closing- the journey was so seamless and I consider myself lucky because I’ve heard horror stories. I recommend him to anyone looking for a loan. Everything was handled electronically expediently and securely   

    ReplyDelete
  6. bittnewdelhiApril 25, 2022 at 10:10 AM

    BIIT(Brahmanand Institute of Information and Technology) is the exquisite Computer institute in east Delhi that prepares you to end up the part of the booming employer with the fashion of notable laptop courses in Delhi in several streams like Information Technology, Hardware and Networking, Animation & Multimedia, Software development, Website designing & improvement, E-Accounting, and so on. IICS has obtained the repute of the pleasant pc education institute that trains you with the pleasant and modern-day Technologies.
    We have a set of enormously skilled strolling footwear for laptop schooling in Delhi at our laptop schooling centers which can be specialists inside the area of presenting best education in the numerous streams.

    ReplyDelete