Chapter 9 - Shares Presentation.

1. Shares
Prepared By- Vinay Golchha

2. Shares
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
A SHARE is the interest of the share holder in a company.

A Share is evidenced by a share certificate (sec.84). A share
certificate is issued by a company under its common seal.

Stock is the aggregate of fully paid-up shares ,consolidated &
divided for the purpose of convenient holding into different
parts. It may be transferable or split up into fractions of any
amount, without regards to the original face value.
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3. 
SHARE CERTIFICATE is a document under the seal of the
company, Signed by at least 2 directors & secretary ,Specifying
the shares, Amount paid-up & name of the share holder.

SHARE WARRANT is a document issued by a public company
stating that its bearer is entitled to the shares specified therein.

4. Share Vs Stock
SHARES






Has a nominal value.
May not be fully paid.
Can only be transferred in
round numbers.
All are of equal
denomination.
Always bear distinctive
numbers.
Can be directly issued to the
STOCK






Has no nominal value.
Always fully paid up.
Is transferable in small
fractions
May be of Unequal amounts
The fractions or parts do not
bear distinctive numbers.
Cannot be issued directly.

5. Types Of Shares
Preference Shares is a stock which may have any combination of features not
possessed by common stock including properties of both an equity and a debt
instrument, and is generally considered a hybrid instrument.
Equity Shares are those shares which are ordinary in the course of company's
business. They are also called as ordinary shares.
*Sweat Equity Shares are equity shares issued by a company to its employees
or directors at a discount, or as a consideration for providing know-how or a
similar value to the company.
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6. Preference Shares
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Redeemable Preference
Shares
Non-Convertible Preference
Shares
Convertible Preference
Shares
Non-Participating
Preference Shares
Participating Preference
Shares
Non-Cumulative Preference
Shares
Cumulative Preference
Shares

7. Forfeiture Of Shares
7

The articles generally give powers to Board of Directors to
forfeit shares as under:
I.
II.

If a member fails to pay any call or installment of a call
Any other circumstance which the articles may provide.
The articles may also provide that the failure by a member to
fulfill any engagement with any other member would forfeit his
share.

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Power of forfeiture is not inherent in a company and therefore

8. Issue of Shares at a Premium
[Section 78]
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
Companies may issue shares at premium irrespective of the fact
whether the shares are listed or not.

No restriction in Companies Act on issue at premium, the only
restriction is on the utilization of premium amount.

Premium cannot be treated as profit as such the amount not
available for distribution as dividend.

Premium amount must be kept in separate account called Securities
Premium Account.
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9. Issue of Shares at a Premium
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
If premium is received in kind, an amount equal to premium amount
must be transferred to Securities Premium Account.

Premium to be used only for the following purposes as mentioned in
Section 78(2):

For issuing fully paid bonus shares;

For writing off preliminary expenses;

For writing off commission, discount expenses on issue of debentures; and

For providing for premium payable on redemption of Redeemable
Preference Shares or debentures.
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10. Further Issue of Shares [Section 81]
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
Called Right Shares.

May be issued at any time after two years from incorporation or one year
from first allotment, whichever is earlier.

Must be offered to the existing shareholders in proportion to their holding.

For listed company, information on quantum and proportion shall be
supplied to the concerned stock exchange.

Company must give notice of offer and the number of shares offered to
existing shareholders.
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11. Further Issue of Shares
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
Give shareholders 15 days to decide.

The notice must state the shareholder's right to renounce the offer in
whole or in part in favour of some other person.

The board may dispose of the shares in a manner beneficial to the
company.

Condition of issue of shares to persons other than existing
shareholders.[Section 81 (1A)]:
I.
Pass a special resolution in general meeting, and
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12. Dividends
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

A dividend is a payment made by a corporation to
its shareholders, usually as a distribution of profits . When a
corporation earns a profit or surplus, it can either re-invest it in
the business (called retained earnings), or it can distribute it to
shareholders.
Rules
I.
II.
III.
IV.
V.
VI.
VII.
To be paid only out of Profit
Resolution at the AGM
Payment of Dividend in Proportion to paid-up capital
Establishment of Investor Education & Protection Fund
To be paid to Registered Shareholder
Unpaid Dividend to be transferred to Unpaid Dividend Accounts
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Penalty for Defaulting Director

13. Bonus Shares
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
When company accumulates large distributable profits it convert it into
capital.

Divide the capital among the existing shareholders in proportion to
their entitlement.

Members do not have to pay for such shares.

Bonus issue is a machinery for capitalizing distributable profits.

Must be sanctioned in the AGM on the recommendation of the board.

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Bonus shares is not income and hence not taxable.

14. Allotment of Shares(Rules To Observed)
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
A prospectus shall be filed with Registrar.

No allotment of shares shall be made to public unless the
minimum subscription amount stated in the prospectus is
raised and received by the company.

Application for shares should be made in prescribed form.

No allotment shall be made until the beginning of the 5th day
after a date on which prospectus is issued.
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15. Cont.

Companies intending to offer must make an application to one
or more stock exchanges for permission.

The whole of the application money should have been paid and
received by company in cash.

All moneys received shall be deposited in a Scheduled Bank
until the certificate to commence business is obtained.

16. Transfer Of Shares
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
A share is a movable property, transferable in the manner
provided by the articles.

A share holder has a statutory right, in the absence of restrictions
in the articles, to transfer shares to any person without consent
of anybody.

A private company with share capital may restrict the right to
transfer its shares by its articles. Transfer of shares is less strict
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in a public company.

17. Transmission Of Shares
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
Where shares pass by operation of law from one person to another.

For example, by holder’s insolvency, or lunacy or by death and
inheritance.

The person to whom shares are transmitted shall make an
application to the company for transmission of shares in his name.

In case if the company refuses to register transmission, right
of appeal arises in the same manner as in case of transfer.

No instrument of transfer is required.
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