Every business run on finance and share capital
is base finance, hence life blood of a company.
PUBLICATION OF CAPITAL (SECTION 60):
Where any communication or publication of a
company contains a statement of the amount of the authorise capital of the
company, it shall also contain a statement in an equally prominent position and
in equally conspicuous characters of the amount of the capital which has been
subscribed and the amount paid – up.
POWER OF COMPANY TO ALTER ITS SHARE CAPITAL
(SECTION 61):
A limited company having a share capital may, if
so authorised by its articles, alter its memorandum in its general meeting
to—
(a) increase its authorised share capital by
such amount as it thinks expedient; or
(b) consolidate and divide all or any of its
share capital into shares of a larger amount than its existing shares. No
consolidation and division which results in changes in the voting percentage of
shareholders shall take effect unless it is approved by the Tribunal.
(c) convert all or any of its fully paid-up
shares into stock, and reconvert that stock into fully paid-up shares of any
denomination;
(d) sub-divide its shares, or any of them, into
shares of smaller amount than is fixed by the memorandum, so, however, that in
the sub-division the proportion between the amount paid and the amount, if any,
unpaid on each reduced share shall be the same as it was in the case of the
share from which the reduced share is derived;
(e) cancel shares which, at the date of the
passing of the resolution in that behalf, have not been taken or agreed to be
taken by any person, and diminish the amount of its share capital by the amount
of the shares so cancelled.
Cancellation of these shares shall not be deemed
to be a reduction of share capital.
FURTHER ISSUES OF SHARES (SECTION 62):
Where a company having a share capital proposes
to increase its subscribed capital by the issue of further shares, such shares
shall be offered –
(a) to person who at the date of the offer are
holders of equity shares of the company in proportion to the paid – up shares
capital on those shares, by sending a letter of offer subject to following
conditions, namely:-
- the offer shall be made by notice specifying the number of shares offered and limiting a time not less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted shall be deemed to have been declined;
- unless the article of the company otherwise provide, the offer shall be deemed to including a right exercisable by the person concerned to renounce the shares offered to him or any of them in favour of any other person and the notice shall contain a statement of this right;
- after the expiry of the time specified in the notice or receipt of earlier intimation from the person to whom the notice is given that he declines to accept the shares offered, the Board of Directors may dispose of them in such manner which is not dis – advantageous to the shareholders and the company;
(b) to employees under a scheme of employees’
stock option to special resolution passed by company and subject to such
conditions as may be prescribed; or
(c) to any person, if it is authorised by a
special resolution, either for cash or for a consideration other than cash, if
the price of such shares is determined by the valuation report of a registered
valuer.
The notice of letter of offer shall be despatched
through registered post or speed post or electronic mode to all the existing
shareholders at least three days before opening of the issue.
These conditions shall not apply to the increase
of the subscribed capital of a company caused by the exercise of an option as a
term attached to the debentures issued or loan raised by the company to convert
such debentures or loan into share in the company. The terms of issue of such
debentures or loan containing such an option to convert have been approved
before the issue of such debentures or raising of loan by a special resolution
passed by the company in general meeting.
Where any debentures have been issued, or loan
has been obtained from any Government by a company, and if that Government
considers it necessary in the public interest so to do, it may, by order, direct
that such debentures or loans or any part thereof shall be converted into shares
in the company on such terms and conditions as appear to the Government to be
reasonable in the circumstances of the case even if terms of the issue of such
debentures or the raising of such loans do not include a term for providing for
an option for such conversion.
In determining the terms and conditions of
conversion, the Government shall have due regard to the financial position of
the company, the terms of issue of debentures or loans, as the case may be, the
rate of interest payable on such debentures or loans and such other matters as
it may consider necessary.
Where the terms and conditions of such
conversion are not acceptable to the company, it may, within sixty days from the
date of communication of such order, appeal to the Tribunal which shall after
hearing the company and the Government pass such order as it deems fit.
Where the Government has, directed that any
debentures or loan or any part thereof shall be converted into shares in a
company and where no appeal has been preferred to the Tribunal or where such
appeal has been dismissed, the memorandum of such company shall, where such
order has the effect of increasing the authorised share capital of the company,
stand altered and the authorised share capital of such company shall stand
increased by an amount equal to the amount of the value of shares which such
debentures or loans or part thereof has been converted into.
ISSUE OF BONUS SHARE (SECTION 63):
A company may issue fully paid-up bonus shares to
its members, in any manner whatsoever, out of—
(i) its free reserves;
(ii) the securities premium account;
or
(iii) the capital redemption reserve
account.
No issue of bonus shares shall be made by
capitalising reserves created by the revaluation of assets.
No company shall capitalise its profits or
reserves for the purpose of issuing fully paid-up bonus shares under sub-section
(1), unless—
(a) it is authorised by its articles;
(b) it has, on the recommendation of the Board,
been authorised in the general meeting of the company;
(c) it has not defaulted in payment of interest
or principal in respect of fixed deposits or debt securities issued by it;
(d) it has not defaulted in respect of the
payment of statutory dues of the employees, such as, contribution to provident
fund, gratuity and bonus;
(e) the partly paid-up shares, if any
outstanding on the date of allotment, are made fully paid-up; and
(f) it complies with such conditions as may be
prescribed.
The bonus shares shall not be issued in lieu of
dividend.
NOTICE TO REGISTRAR FOR ALTERATION OF CAPITAL
(SECTION 64):
Where—
(a) a company alters its share capital in any
manner specified in sub-section (1) of section 61;
(b) an order made by the Government under
sub-section (4) read with sub-section (6) of section 62 has the effect of
increasing authorised capital of a company; or
(c) a company redeems any redeemable preference
shares,
the company shall file a notice the prescribed
form with the Registrar within a period of thirty days of such alteration or
increase or redemption, as the case may be, along with an altered
memorandum.
If a company and any officer of the company who
is in default contravene the provisions of sub-section (1), it or he shall be
punishable with fine which may extend to one thousand rupees for each day during
which such default continues, or five lakh rupees, whichever is less.
UNLIMITED COMPANY TO PROVIDE FOR RESERVE SHARE
CAPITAL ON CONVERSION INTO LIMITED COMPANY (SECTION 65):
An unlimited company having a share capital may,
by a resolution for registration as a limited company under this Act, do either
or both of the following things, namely—
(a) increase the nominal amount of its share
capital by increasing the nominal amount of each of its shares, subject to the
condition that no part of the increased capital shall be capable of being called
up except in the event and for the purposes of the company being wound up;
and/or
(b) provide that a specified portion of its
uncalled share capital shall not be capable of being called up except in the
event and for the purposes of the company being wound up.
We will discuss reduction of share capital in
next post.
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