What is a Company? A Company is a voluntary association of persons formed for the purpose of doing business, having a distinct name and limited liability. They can be incorporated under the Companies Act (it may be any type of company) Corporations enacted under special enactments ( Even those which are incorporated outside India) Corporate sole Any other body corporate notified by the central government COMPANY LAW

Share Capital Share: Share is defined as “an interest having a money value and made up of diverse rights specified under the articles of association”. Share capital: Share capital means the capital raised by the company by issue of shares. A share is a share in the share capital of the company including the stock. Share gives a right to participate in the profits of the company, or a share in the assets when the company is going to be wound up.

Other features of a share A share is not a negotiable instrument, but it is a movable property. It is also considered to be goods under the Sale of Goods Act, The company has to issue the share certificate. It is subject to stamp duty. The ‘Call’ on Shares is a demand made for payment of price of the shares allotted to the members by the Board of Directors in accordance with the Articles of Association. The call may be for full amount or part of it.

Share Certificate and Share Warrant Share Certificate: The Share Certificate is a document issued by the company and is prima facie evidence to show that the person named therein is the holder ( title) of the specified number of shares stated therein. Share certificate is issued by the company to the ( share holder) allottee of shares. The company has to issue within 3 months from the date of allotment. In case of default the allottee may approach the central government Share Warrant: The share warrant is a bearer document issued by the company under its common seal. As share warrant is a negotiable instrument, it is transferred by endorsement and by mere delivery like any other negotiable instrument.

Share Capital & Debentures By Public Company (Section 23 (1)) Public offer through prospectus (Part I Chapter III) Private Placement (Section 42 - Part II Chapter III, Section 62(1)(c), Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014 and Rule 13 of Companies (Share Capital and Debentures) Rules, 2014) Rights Issue (Section 62(1)(a)) Bonus Issue (Section 63 & Rule 14 of Companies (Share Capital and Debentures) Rules, 2014)

Share Capital & Debentures By Private Company (Section 23 (2)) Private Placement (Section 42 - Part II Chapter III, Section 62(1)(c), Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014 and Rule 13 of Companies (Share Capital and Debentures) Rules, 2014) Rights Issue (Section 62(1)(a)) Bonus Issue (Section 63 & Rule 14 of Companies (Share Capital and Debentures) Rules, 2014)

Share Capital & Debentures Kinds of Securities Equity Share Capital (Section 43) With voting rights With differential rights as to dividend, voting or otherwise (Rule 4 of the Companies (Share Capital and Debentures) Rules, 2014 Preference Share Capital (Section 43) Redeemable Preference Shares can exceed 20 years and up to 30 years for specified infrastructure projects (Refer Schedule VI) (Section 55 and Rule 9 of Companies (Share Capital and Debentures) Rules, 2014) Convertible Preference Shares – Optionally or Compulsorily Convertible Debentures Non-Convertible Unsecured Debentures Non-Convertible Secured Debentures Convertible Debentures – Optionally Convertible or Compulsorily Convertible

Share Capital & Debentures Issue of Secured Debentures (Section 71 and Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014) The period of redemption cannot exceed 10 years except in a company engaged in the setting up of infrastructure projects for which the maximum period if 30 years Security by creation of charge on the properties or assets of the company, having a value which is sufficient for the due repayment of the amount of debentures and interest thereon Appointment of debenture trustee Creation of Debenture Redemption Reserve Created out of profits of the company available for distribution of dividend DRR equivalent to at least 50% of the amount raised through debenture Each year on or before April 30, invest or deposit, not less than 15% of the amount of debentures maturing during the year ending on March 31 of the next year in certain prescribed methods The remaining invested or deposited shall not at any time fall below 15% of the amount of the debentures maturing during the year ending on March 31 of that year

Share Capital & Debentures Voting rights in respect of preference shares – no distinction between cumulative and non-cumulative preference shares (Section 47) Bonus issuance specifically provided – certain conditions imposed – cannot be issued from revaluation reserve and in lieu of dividend (Section 63) – Offer once made cannot be withdrawn Rule 14 of Companies (Share Capital and Debentures) Rules, 2014) Prohibition of issue of shares at discount - issue at discount to be void (Section 53) Issue of sweat equity shares permitted (Section 54 & Rule 8 of Companies (Share Capital and Debentures) Rules, 2014) Preferential issue value to be determined by registered valuer (Section 62 and Rule 13 of Companies (Share Capital and Debentures) Rules, 2014) Specific mention of issue of convertible debentures subject to shareholders’ resolution (Section 71)

Share Capital & Debentures In Private Placement monies payable shall be paid through cheque or demand draft of other banking channels but not by cash (Section 42 (5)) Allotment of Securities within 60 days from the date of receipt of application money (Section 42 (6)) Money received on application shall be kept in a separate bank account and shall not be utilised for any purpose except (Section 42 (6)) For adjustment against allotment of securities For repayment of monies where the company is unable to allot securities Certificate for the allotted securities to be issued Within 2 months from the date of allotment of shares Within 6 months from the date of allotment of debentures

How can be company be wound up ? By passing a special resolution If there is a default in holding the statutory meeting Failure to commence the business If there is reduction in the membership of the minimum number of members as per the statutory requirement If it not able to pay its debts

Modes of winding up Compulsory winding up under the supervision of the court (Reasons as stated in the previous slide) Compulsory winding up may happen for just and equitable reasons also. The just and equitable grounds can be like loss of substratum, where there is dead lock in the management, etc Voluntary winding up ( Members voluntary winding up and creditors voluntary winding up) Voluntary winding up subject to the supervision of the court.

Winding up procedure A petition for winding up has to be filed by the concerned person to the prescribed authority Liquidator to be appointed to safeguard the property of the company Then the court will hear the matter and pass necessary orders. It can dismiss the petition or pass an order of winding up