THE COMPANIES BILL, 1997

PART IV

SHARE CAPITAL AND DEBENTURES

SECTIONS : 74-85

Nature, numbering and certificate of shares

74 Nature of shares, etc. and nomination. –

(1). The shares, 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.

(2.) Every holder of shares in, or holder of debentures of, a company may, at any time nominate, in the prescribed manner, a person to whom his shares in, or debentures of, the company shall vest in the event of his death.

(3). Where the shares in, or debentures of, a company are held by more than one person jointly, the joint holders may together nominate, in the prescribed manner, a person to whom all the rights in the shares or debentures of the company shall vest in the event of death of all the joint holders.

(4). Notwithstanding anything contained in any other law for the time being in force or in any disposition, whether testamentary or otherwise, in respect of such shares in or debentures of the company, where a nomination made in the prescribed manner, purports to confer on any person the right to vest the shares in or debentures of the company, the nominee shall, on the death of the shareholder or holder of debentures of the company or, as the case

may be, on the death of the joint holders become entitled to all the rights in the shares or debentures of the company or, as the case may be, all the joint holders, in relation to such shares in, or debentures of the company to the exclusion of all other persons, unless the nomination is varied or cancelled in the prescribed manner.

(5). Where the nominee is a minor, it shall be lawful for the holder of the shares in or holder of debentures, making the nomination to appoint in the prescribed manner any person to become entitled to shares in or debentures of the company, in the event of his death, during the minority.

(6) Each share in a company having a share capital shall be distinguished by its appropriate number :

Provided that nothing in this section shall apply to the shares held with a depository.

(7) If a company fails to comply with any of the provisions of this section, it shall be punishable with fine which may extend to ten thousand rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to ten years, or with fine which may extend to fifty thousand rupees, or with both.

75 Certificate of shares..-

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

(2) A certificate may be renewed or a duplicate of a certificate may be issued, if the certificate-

(a) is proved to have been lost or destroyed, or

(b) having been defaced or mutilated or torn, is surrendered to the company.

(3) If a company with intent to defraud renews a certificate or issues a duplicate thereof, it shall be punishable with fine which may extend to one lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both.

(4) Notwithstanding anything contained in the articles of a company, the manner of issue or renewal of a certificate or issue of a duplicate thereof, the form of a certificate (original or renewed) or of a duplicate thereof, the particulars to be entered in the register of members or in the register of renewed or duplicate certificates, the form of such registers, the fee on payment of which, the terms and conditions, if any (including terms and conditions as to evidence and indemnity and the payment of out-of-pocket expenses incurred by a company in investigating evidence) on which a certificate may be renewed or a duplicate thereof may be issued, shall be such as may be prescribed.

Kinds of share capital

76 Preference and equity share capital...-

(1) "Preference share capital" means, with reference to any company limited by shares, that part of the share capital of the company which fulfils both the following requirements, namely:-

(a) that as respects dividends, it carries, or will carry, a preferential right to be paid a fixed amount or an amount calculated at a fixed rate, which may be either free of, or subject to, income-tax; and

(b) that as respects capital, it carries or will carry, on a winding up or repayment of capital, a preferential right to be repaid the amount of the capital paid-up or deemed to have been paid up, whether or not there is a preferential right to the payment of either or both of the following amounts, namely-

(i) any money remaining unpaid, in respect of the amounts specified in clause (a), up to the date of the winding up or repayment of capital; and

(ii) any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company.

Explanation.-Capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely:-

(i) that, as respects dividends, in addition to the preferential right to the amount specified in clause (a), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid;

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

(2) "Equity share capital" means, with reference to any such company, all share capital which is not preference share capital.

(3) The expression "preference share" and "equity share" shall be construed accordingly.

 

77. Kinds of share capital. –

  1. The share capital of a company limited by shares shall be of two kinds only, namely:-

(a) 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 be prescribed;

(b) preference share capital.

(2) A company may, if so authorised by its articles, pay dividends in proportion to the amount paid-up on each share where a larger amount is paid up on some share than on others.

78 Voting rights..-

  1. Subject to the provisions of the proviso to sub-section (2) of section 80-

(a) every member of a company limited by shares and holding any equity share capital therein shall have a right to vote, in respect of such capital, on every resolution placed before the company; and

(b) his voting right on a poll shall be as specified at the time of issue of such capital.

(2)

(a) Subject as aforesaid and save as provided in clause (b) of this sub-section, 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.

Explanation.-Any resolution for winding up the company or for the repayment or reduction of its share capital shall be deemed directly to affect the rights attached to preference shares within the meaning of this clause.

(b) Subject as aforesaid, every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, be entitled to vote on every resolution placed before the company at any meeting, if the dividend due on such capital or any part of such dividend has remained unpaid-

(i) in the case of cumulative preference shares, in respect of an aggregate period of not less than two years preceding the date of commencement of the meeting; and

(ii) in the case of non-cumulative preference shares, either in respect of a period of not less than two years ending with the expiry of the financial year immediately preceding the commencement of the meeting or in respect of an aggregate period of not less than three years comprised in the six years ending with the expiry of the financial year aforesaid.

Explanation.-For the purposes of this clause, dividend shall be deemed to be due on preference shares in respect of any period, whether a dividend has been declared by the company on such shares for such period or not,-

(a) on the last day specified for the payment of such dividend for such period, in the articles or other instrument executed by the company in that behalf; or

(b) in case no day is so specified, on the day immediately following such period;

(c) where the holder of any preference share has a right to vote on any resolution in accordance with the provisions of this sub-section, his voting right on a poll, as the holder of such share, shall, subject to the proviso to sub-section (2) of section 80, be in the same proportion as the capital paid up in respect of the preference share bears to the total paid-up equity capital of the company.

79. Saving. –

Nothing in sections 76 to 78 shall apply to a private company unless it is a subsidiary of a public company.

Miscellaneous provisions as to share capital

80 Calls on shares.. –

(1) Where any calls for further share capital are made on shares, such calls shall be made on a uniform basis on all shares falling under the same class.

Explanation.-For the purposes of this section, shares of the same nominal value on which different amounts have been paid-up shall be deemed to fall under the same class.

(2) A company may, if so authorised by its articles, accept from any member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called-up.

Provided that no such member shall be entitled, where the company is one limited by shares, to any voting rights in respect of the moneys so paid by him until the same would, but for such payment, become presently payable.

(3) A company may, if so authorised by its articles, pay dividends in proportion to the amount paid up on each share when a larger amount is paid up in some shares than others.

81.. Power of limited company to alter its share capital –

(1) A limited company having a share capital, may, if so authorised by its articles, alter the conditions of its memorandum as follows, that is to say, it may-

(a) increase its authorised share capital by such amount as it thinks expedient by creating new shares;

(b) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

(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.

(2) The powers conferred by this section shall be exercised by the company by ordinary resolution passed in general meeting and shall not require to be confirmed by the Court.

(3) A cancellation of shares in pursuance of this section shall not be deemed to be a reduction of share capital within the meaning of this Act.

(4) If a company having a share capital has-

(a) consolidated and divided its share capital into shares of larger amount than its existing shares;

(b) converted any shares into stock;

(c) reconverted any stock into shares;

(d) sub-divided its shares or any of them;

(e) redeemed any redeemable preference shares; or

(f) cancelled any shares, otherwise than in connection with a reduction of share capital under sections 86 to 90;

the company shall within thirty days after doing so, give notice thereof to the Registrar specifying, as the case may be, the shares consolidated, divided, converted, sub-divided, redeemed or cancelled, or the stock reconverted.

(5) The Registrar shall thereupon record the notice, and make any alterations which may be necessary in the company's memorandum or articles or both.

(6) If default is made in complying with sub-section (4), the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

82. Effect of conversion of shares into stock. –

Where a company having a share capital has converted any of its shares into stock, and given notice of the conversion to the Registrar under sub-section (4) of section 81, all the provisions of this Act which are applicable to shares only, shall cease to apply as to so much of the share capital as is converted into stock.

 

83 Notice of increase of share capital or of members..-

(1) Where a company having a share capital, whether its shares have or have not been converted into stock, has increased its authorised share capital and where a company, not being a company limited by shares, has increased the number of its members beyond the registered number, it shall file with the Registrar, notice of the increase of capital or of members within thirty days after the passing of the resolution authorising the increase; and the Registrar shall record the increase and also make any alterations which may be necessary in the company's memorandum or articles or both.

(2) The notice to be given as aforesaid shall include particulars of the classes of shares affected and the conditions, if any, subject to which new shares have been or are to be issued.

(3) If default is made in complying with this section, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

84 Power of unlimited company to provide for reserve share capital on re-registration.-

An unlimited company having a share capital may, by its resolution for registration as a limited company in pursuance of 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, but 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;

(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.

85 Reserve liability of limited company. –

A limited company may, by special resolution, determine that any portion of its share capital which has not been already called-up shall not be capable of being called-up, except in the event and for the purposes of the company being wound up, and thereupon that portion of its share capital shall not be capable of being called-up except in that event and for those purposes.