Presentation on theme: "RECAP Topics covered Prospectus (Definition). Contents of Prospectus."— Presentation transcript:
1 RECAP Topics covered Prospectus (Definition). Contents of Prospectus. Requirements relating to the ProspectusLiabilities arising out of untrue statement in ProspectusStatement in lieu of Prospectus
2 SHARES, SHARE CAPITAL AND THEIR CLASSES Chapter-09SHARES, SHARE CAPITALAND THEIR CLASSES
3 DEFINITION: Share: Boreland Trustees v/s Steel Bros. & Co. Ltd.: THE COMPANIES ORDINACE defines share as;“A share is a share in the share capital of a Company.”Boreland Trustees v/s Steel Bros. & Co. Ltd.:“A share represents the interest of a share holder in the capital of the Company & this interest is measured by the number of shares he is holding & the amount paid by him to the Company on shares.”Thus, the amount of capital to be raised by a Company is always divided into small parts or units of equal value & these units are called SHARES
4 DEFINITION: Share:Right to receive a certain proportion of the profits made by the company while the company is a going concern and of the capital when it is wound up It includes stocks. It is a movable property transferable in a manner provided by the articles of the company (S-89)
5 DEFINITION: Share:Share Capital of a company is collected by issue of sharesShare is one of the units into which total capital is dividedThe person who owns the share is called share holder
6 CLASSES OF SHARES:Most companies have only one class of shares and that is ordinary shares.It is increasingly common for even very small private companies to have different share classes. This may be done for various reasons such as to be able to vary the dividends paid to different share holders and to create non voting shares etc.(Non voting shares carry no right to vote and usually no right to attend general meeting either)
7 CLASSES OF SHARES: CLASSES OF SHARES Ordinary Shares Preference Shares Redeemable Preference Shares
8 CLASSES OF SHARES: Ordinary shares: An ordinary shares represents equity ownership in a company and entitles the owner to a vote in matters put before share holders in proportion to their percentage ownership in the company.Ordinary share holders are entitled to receive dividend if any are available after dividends on preferred shared are paidSo in simple words Ordinary shares have:Right to share in profits, if availableRight to share in surplus assets on winding up andVoting rights.
9 Cond……. b) Preference shares: Company stock with dividends that are paid to shareholders before common stock dividends are paid out.Preference shares typically pay a fixed dividend, whereas common shares do not.And unlike common shareholders, preference share shareholders usually do not have voting rights.The main benefit to owning preference shares are that the investor has a greater claim on the company's assets than common stockholders.
10 Cond……. b) Preference shares: Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before common stockholdersSo in simple words preference sharesCarry the right to a fixed dividend.have no voting rights.Dividend may either be cumulative or non-cumulative.
11 Cond…….b) Preference shares:Meaning Of Preference Shares Preference shares are those, which enjoy the following two preferential rights:1. Dividend at a fixed rate or a fixed amount on these shares before any dividend on equity shares.2. Return of preference share capital before the return of equity share capital at the time of winding up of the company.
12 Cond…….Differences b/w Ordinary and Preferences sharesOrdinary shares are the most common kind of shares. An ordinary share gives the holder voting rights in the company and entitles the person to all dividend distributions as a part-owner of the company.Preference shares allow holders to be paid dividends before ordinary shareholders and they also have priority over asset claims if the company goes bust. The downside is that preference shareholders have a fixed dividend and only limited voting rights with respect to company affairs.
13 Cond…….The dividend on ordinary shares is uncertain and variable (high when the company does well, poor or non-existent when it does badly). Preference shareholders get a fixed dividend which, if not paid, usually accrues until it can be.Each ordinary share usually carries a vote. Preference shares do not usually carry a vote unless dividends fall into arrears.Preference shares may be issued with the right of conversion into ordinary shares. These are called convertibles.
14 Cumulative and non-cumulative preference shares With regard to the payment of dividend, preference shares may be cumulative or non-cumulativeCumulative preference shares:If the profits of the company in any years are not sufficient to pay the fixed dividend, on the preference shares the deficiency must be made up out of the profits of subsequent years.The accumulated arrears of dividend must be paid before anything is paid out of the profits to the holders of any other class of shares.
15 Cumulative and non-cumulative preference shares The dividend is only payable out of the net profits of each year.If there are no profits in any year, the arrears of dividend cannot be claimed in the subsequent years.Preference shares are presumed to be cumulative unless expressly described as non-cumulative. Any ambiguous language in the articles will not be enough to make them non-cumulative.
16 Cond……..c) Redeemable Preference Shares:A preference share which must be bought back by the company at an agreed date and for an agreed pricePreference shares which are redeemable at the option of the company.
17 Cond……..c) Redeemable Preference Shares:The company issues redeemable preference shares for a specific time period.These shares are issued when the company has some growth and expansion plans in mind.The shareholders can choose the time to maturity on these shares.At the end of the stipulated period, they can choose to exchange these shares for either equity shares of the company or for cash.The shareholders are repaid the face value of the shares plus the dividends.
18 Cond…….. Preferential Payments These shares are always given preferential treatment over other classes of shares.They get priority in payments over common stockholders.These payments pertain to both quarterly dividend payments, as well as the payments that are made when the company is eventually liquidated. Then the assets are used first to pay the creditors of the company and if money still remains, the redeemable preference shareholders are paid.A majority of the time, redeemable preference shares are favored over other classes of preference shares as well.
19 SHARE CAPITAL:Particular amount of money with which a business is started.Share capital is the money invested in a company by the shareholders. Share capital is a long-term source of finance.In return for their investment, shareholders gain a share of the ownership of the company.
20 SHARE CAPITAL: Meaning Of Share Capital A joint stock company should have capital in order to finance its activities. It raises its capital by issue of shares.The Memorandum of Association must state the amount of capital with which the company is desired to be registered and the number of shares into which it is to be divided.When total capital of a company is divided into shares, then it is called share capital.It constitutes the basis of the capital structure of a company.In other words, the capital collected by a joint stock company for its business operation is known as share capital.Share capital is the total amount of capital collected from its shareholders for achieving the common goal of the company as stated in Memorandum of Association.
21 SHARE CAPITAL: Types Of Share Capital Share capital of a company can be divided into different categories:Authorized, registered, maximum or normal capitalIssued CapitalSubscribed CapitalCalled Up CapitalPaid-up Capital
22 SHARE CAPITAL: Types Of Share Capital Authorized, registered, maximum or normal capitalMaximum amount of capital, a company can issue according to its memorandum.The maximum amount of capital, which a company is authorized to raise from the public by the issue of shares, is known as authorized capital.It is a capital with which a company is registered, therefore it is also known as registered capital.
23 Cond…..2.Issued CapitalPart of amount of authorised capital, offered by directors and promoters for subscription.Generally, a company does not issue its authorized capital to the public for subscription, but issues a part of it. So, issued capital is a part of authorized capital, which is offered to the public for subscription, including shares offered to the vendor for consideration other than cash.The part of authorized capital not offered for subscription to the public is known as 'un-issued capital'. Such capital can be offered to the public at a later date.
24 Cond….. 3.Subscribed Capital Part of amount of issued capital, taken by people.It can not be said that the entire issued capital will be taken up or subscribed by the public.It may be subscribed in full or in part.The part of issued capital, which is subscribed by the public, is known as subscribed capital
25 Cond….. 4.Called Up Capital It is that part of subscribed capital, which is called by the company to pay on shares allotted.It is not necessary for the company to call for the entire amount on shares subscribed for by shareholders.The amount, which is not called on subscribed shares, is called uncalled capital.
26 Cond…..5. Paid-up CapitalPart of subscribed capital against which money has been received.It is that part of called up capital, which actually paid by the shareholders. Therefore it is known as real capital of the company.Whenever a particular amount is called and a shareholder fails to pay the amount fully or partially, it is known an unpaid calls or calls in arrears.
27 CLASSES AND KINDS OF SHARE CAPITAL (SEC.90) A company limited by shares can have different kinds of share capital and classes.Kinds and classes are in accordance with its MOA and AOA.The rights of the classes only be conferred in manner prescribed in the Rules.
28 CLASSES AND KINDS OF SHARE CAPITAL (SEC.90) A company limited by shares can have different kinds of share capital and classes.Kinds and classes are in accordance with its MOA and AOA.The rights of the classes only be conferred in manner prescribed in the Rules.
29 TYPES OF SHARES & SHARE CAPITAL: Scrip less trading: It is a term used to describe a procedure of trading in shares, where actual share certificates are not traded but shares are traded in electronic forms, the shares traded being adjusted by accounting by an organization known as depository.
30 TYPES OF SHARES & SHARE CAPITAL: SCRIP LESS SHARES:Optional for the shareholders of listed companies to keep shares in physical form.Or to deposit those shares with Central Depository Company (CDC).Enjoy the ownership of shares without having script of those shares.Shares are kept deposited in an account opened with CDC.
31 Cond……. CDC act just like a bank for securities. CDC does not own the shares although securities are registered in the name of CDCCDC is named as member in the members register but it does not beneficially own the securities.It is just a trustee , holding the shares in trust on behalf of owners of shares.
32 Cond…… FULLY PAID SHARES ONLY: (Sec 91) No company is allowed to issue partly paid shares.Full nominal value of shares should be received by every company.
33 UP COMING LECTURES Topics to be covered Allotment of Shares. Application for Allotment of Share. (S-67)Restrictions as to Allotment. (S-68)Effects of irregular Allotments.(S-70)Repayment of money received but shares not allotted (S-71)Allotment of shares to be dealt on Stock Exchange.(S-72)Return of Allotments (S-73).