Oct 20, 2017
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Share Capital under The Companies Act, 2013

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“Share” means a share in the share capital of a company and includes stock. This article talks about share capital and types of share capital under The Companies Act, 2013.

Share Capital

Share capital thus known as owned capital of the company. It denotes the amount of capital raised by the issue of shares, by a company. Hence collected through the issue of shares and remains with the company till its liquidation. Since it is the money of the shareholder and the shareholder are the owners of the company. The total share capital however divided into small parts and each part called as share. Share considered the smallest part of the total capital of a company.

Kinds of Share Capital

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

a.   Equity share capital

b.   Preference share capital

Equity share capital

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

The Equity share capital—

i. with voting rights; or

ii. with differential rights as to dividend, voting or otherwise in accordance with such rules as may prescribed.

These differential rights may have difference related to dividend, voting or otherwise in accordance with rules. The term otherwise bring scope for innovation with in limit of rules. It may because of difference related to managing control, power to appoint director, or power to appoint proxy and so on.

Preference share capital

“Preference share capital”, with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to—

a. payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either seem free of or subject to income-tax; and

b. repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have paid-up, whether or not, there considered as preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company.

NATURE OF SHARES OR DEBENTURES

The shares or debentures or other interest of any member in a company shall be movable property transferable in the manner provided by the articles of the company.

Numbering of Shares

Every share in a company of a share capital shall distinguished by its distinctive number. It shall apply to a share held by a person whose name entered as holder of beneficial interest in such share in records of a depository.

Certificate of Shares

1.  A certificate issued under the common seal, if any, of the company or signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary, specifying the shares held by any person, shall prima facie evidence of the title of the person to such shares.

2.  A duplicate certificate of shares may thus issued, if such certificate —

     a. proved to have lost or destroyed; or

    b.  has defaced, mutilated or torn and thus surrendered to the company.

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

4.  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.

Punishment for fraud under Certificate of Shares

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

Voting Rights

1.       Every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, have a right to vote only on resolutions placed before the company which directly affect the rights attached to his preference shares,

2.       Any resolution for the winding up of the company or for the repayment or reduction of its equity or preference share capital and his voting right on a poll shall be in proportion to his share in the paid-up preference share capital of the company.

3.       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.

4.       The dividend in respect of a class of preference shares has not been paid for a period of two years or more, such class of preference shareholders shall have a right to vote on all the resolutions placed before the company.

Variation of Shareholders Rights

1. Where a share capital of the company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or by means of a special resolution passed at a separate meeting of the holders of the issued shares of that class,—

a.  if provision with respect to such variation thus contained in the memorandum or articles of the company; or

b.  in absence of such provision in memorandum or articles,

if such variation thus not prohibited by terms of issue of shares of that class:

Provided that if variation by one class of shareholders affects the rights of any other class of shareholders, the consent of three-fourths of such other class of shareholders shall also obtained and the provisions of this section shall apply to such variation.

Rights of Shareholders

Where the holders of not less than ten per cent of the issued shares of a class did not consent to such variation or vote in favor of the special resolution for the variation, they may apply to the Tribunal to have the variation cancelled, and where any such application is made, the variation shall not have effect unless and until it is confirmed by the Tribunal:

Provided that an application under this section shall be made within twenty-one days after the date on which the consent was given or the resolution was passed, as the case may be, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.

The decision of the Tribunal on any application shall be binding on the shareholders. The company shall, within thirty days of the date of the order of the Tribunal, file a copy thereof with the Registrar.

Punishment for fraud under Rights of Shareholders

Where any default is made in complying with the provisions of this section, the company shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees, or with both.

 

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Article Categories:
The Companies Act, 2013

Avani is a LL.B. student of New Law College. Classical use of language and adeptness with the written word make her treasure useful legal information. In her spare time, she writes prose and pursue an active interest in creative writing.

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