Part 6 - Share Capital and Debentures

Own Shares

Part 6 - Share Capital and Debentures

Nature, Numbering and Certificate of Shares
1. The shares 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. A certificate under the common seal of the company specifying any shares held by
any member shall be prima facia evidence of the title of the member to the shares
therein specified.
3. Each share in a company shall have a distinctive number.
4. a company limited by share may have different kinds of share capital and classes
therein as provided by its memorandum and articles:
Provided that different rights and privileges in relation to the different classes of
shares may only be conferred in such manner as may be prescribed.
5. No company shall issue partly paid shares:
Provided that where a company has partly paid shares on the commencement of this
Ordinance, it
(i) shall not issue any further share capital until all the shares previously issued have
become fully paid up
(ii) shall pay dividend only in proportion to the amount paid up on each share

Alteration
92. Power of company limited by shares to alter its share capital
(1) a company limited by shares, if so authorised by its articles, may alter the conditions
of its memorandum in a general meeting so as to (a) INCREASE its share capital by such amount as it thinks expedient;
(b)CONSOLIDATE AND DIVIDE the whole or any part of its share capital into shares
of larger amount than its existing shares;
(c) SUB-DIVIDE its shares, or any of them, into shares of smaller amount than is
fixed by the memorandum; or
(d)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:
Provided that in the event of issuance, consolidation or sub-division of shares, the
rights attaching to the new shares shall be strictly proportional to the rights
attaching to the previous shares to consolidated or sub-divided:
The company shall file with the registrar notice of the exercise of any power conferred
to in sub-section (1) within 15days from the exercise thereof.
a cancellation of shares in pursuance of sub-section (1)
shall not be deemed to be a reduction of share capital within the meaning of this
Ordinance.
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(3-A) Notwithstanding anything contained in this Ordinance or any other law for the time being in force or
the memorandum and articles,
where the authorised capital of a company is fully subscribed, or the unsubscribed
capital is insufficient,
the same shall be deemed to have been increased to the extent necessary for issue
of shares to a scheduled bank or financial institution
in pursuance of any obligation of the company to issue shares to such bank or
institution
94. Notice of INCREASES of share capital or of members
(1) Where a company having a share capital has
(a)

resolved to increase its shares capital beyond the authorised capital, or

(b)

such capital is increased under sub-section(3-A) of section 92 and

(c)

Provided that where default is made by a company in filing a notice of

increase in the authorised capital under sub-section (3-A) of section 92,
the scheduled bank or the financial institution to whom shares have been
issued may file notice of such increase with the registrar and
such notice shall be deemed to have been filed by the company itself and
the scheduled bank or financial institution shall be entitled to recover from
the company the amount of any fee properly paid by it to the registrar in
respect of such increase.

(d)

where a company not having a share capital has resolved to

increase the number of its members beyond the number previously registered,

it shall file with the registrar, within 15days after the passing of the resolution, a
notice of the increase of capital or members, as the case may be, and the
registrar shall record the increase:
(2) The notice to be given under sub-section (1) shall include particulars of the shares to
be affected and the conditions subject to which the new shares are to be issued.
(3) If a company makes default in complying the requirements of sub-section (1), it shall
be liable to a fine which may extend to 100rupees for every day during which the
default continues, and every officer of the company who knowingly and wilfully
authorises or permits the default shall be liable to the likepenalty.
(4) No resolution referred in sub-section (1) shall take effect unless the notice required
by that sub-section to be filed with the registrar is duly sent to him.
93. Notice to registrar of CONSOLIDATION of share capital, etc
1. Where a company having a share capital has consolidated and divided its share
capital into shares of larger amount; than its existing shares,
it shall, within 15days of the consolidation and division, file notice with the registrar
of the same, specifying the shares consolidated and divided.
2. If a company makes default in complying with the requirements of subsection (5) of section 92 or sub-section (1) of this section, it shall be liable to a fine which may
extent to 100rupees for every day during which the default continues, and every
officer of the company who knowingly, and wilfully authorises or permits the
default shall be liable to the likepenalty.
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95. Prohibition of purchase or grant of financial assistance by a company for purchase
of its own or its holding company's shares
1. No company shall have power to buy its own shares or the shares of its holding
company.
2. No company limited by shares, other than a private company, not being a
subsidiary of a public company,
shall give, whether directly or indirectly, and
whether by means of a loan, guarantee, the provision of security or otherwise,
any financial assistance
for the purpose of or in connection with purchase made or to be made;
by any person of any shares in the company or, where the company is a subsidiary, in
its holding company

Provided that nothing in this sub-section shall prevent the company from advancing or
securing an advance to any of its salaried employees, including a chief executive
who, before his appointment as such, was not a director of the company, but
excluding all directors of the company, for purchase of shares of the company or of
its subsidiary or holding company, if making or securing of such advance is a part
of tile contract of service of such employee.
3. If a company acts in contravention of sub-section (1) or sub-section (2), the company and
every officer of the company who is knowingly and wilfully in default shall be liable
to a fine which may extend to 10,000rupees if the default relates to a listed
company and to 2,000rupees if the default relates to any other company)
4. Nothing in this section shall prevent
(a)

a company from redeeming any shares or any other redeemable security

issued in accordance with the provisions of this Ordinance; and

(b)

a listed company from purchasing its own shares in accordance with the
provisions of this Ordinance.

95A. Power of company to purchase its own shares

1. Notwithstanding anything contained in this Ordinance or any other law for the time being in force or
the memorandum and articles,
a listed company may, subject to the provisions of this section and the rules framed
by the Commission in this behalf, purchase its own shares
2. The purchase shall be authorized by a special resolution which shall indicate the
maximum number of shares to be purchased; the maximum price at which the shares
may be purchased; and the period within which the purchase is to be made.
3. The notice of the meeting in which the special resolution authorizing the purchase of
shares is proposed to be moved, shall be accompanied by an explanatory statement
containing all material facts including the following(a)

justification for the purchase.

(b)

source of funding;

(c)

effect on the financial position of the company; and

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nature and extent of the interest, if any, of every director, whether directly or

indirectly.

Own Shares

(d)

4. The purchase shall always be in cash and shall be out of the distributable profits.
5. Where shares are purchased by a company on premium,
the account of premium shall he charged to Share Premium Account of the company
or in the absence of any balance therein, to the distributable profits of the company.
6. Where purchase is made at a price lower than the nominal value of shares,
the difference shall be credited to CapitalRe-purchase Reserve Account.
7. The company shall have such debt equity and current ratios as may be prescribed.
8. The majority of the directors including the chief executive, shall
at a meeting make a declaration of solvency verified by an affidavit to the effect that
they have made a full inquiry into the affairs of the company, and
that after having done so, they have formed the opinion that the company shall
continue to operate as a going concern
and that it is capable of meeting its liabilities on time during the period up to the end
of the immediately succeeding financial year.
9. The purchase shall be made through a tender system and the mode of tender shall
be decided by the company in general meeting through a special resolution.
10.The shares purchased under this section shall not be resold and shall be cancelled
forthwith.
The amount of the company's paid up share capital shall be diminished by the nominal
value of such shares accordingly.
The amount, by which the company's paid up share capital is thereby diminished
on cancellation of the shares purchased shall, after accounting for the credit, if
any, pursuant to sub-section (6) of this section, be transferred from the distributable profits
to an account to be called CapitalRe-purchase Reserve Account.
11.The provisions this Ordinance relating to the reduction of a company's share
capital apply as if the Capital Re-purchase Reserve Account were paid-up share capital
of the company, except that the reserve account may be applied by the company
in paying up its unissued shares to be allotted to members of the company as fully
paid bonus shares.
12.Where a company has purchased its own shares under this section,
it shall maintain a register of shares so purchased and enter therein the following
particulars, namely
(i)
(ii)
(iii)

numbers of shares purchased;

consideration paid for the shares purchased;
mode of purchase; and

(iv)

the date of cancellation of such shares

A return about the purchase of shares under this section containing such particulars
relating to purchase as may be prescribed, along with the declaration of
solvency made under sub-section (8), shall be filed with the Commission and the
registrar within 30days of the purchase.

Part 6 - Share Capital and Debentures

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13.If a company makes default in compliance with the provisions of this section, the
company shall be liable to a fine which may extend to 1millionrupees and any
officer of the company who is knowingly and wilfully in default shall also be
punishable with imprisonment for a term which may extend to 6months, or with fine
which may extend to 1millionrupees, or with both.

Part 6 - Share Capital and Debentures

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Variation of Shareholder's Rights

108. Variation of shareholders' rights
1. The variation of the rights of shareholders of any class shall be effected only in the
manner laid down in section 28 (Alteration of articles).
2. Not less than 10% of the class of shareholders who are aggrieved by the variation of
their rights under sub-section (1) may, within 30days of the date of the resolution
varying their rights,
apply to the Court for an order cancelling the resolution:
Provided that the Court shall not pass such an order unless it is shown to its
satisfaction that some facts which would have had a bearing on the decision of the
shareholders were withheld by the company in getting the aforesaid resolution
passed or, having regard to all the circumstances of the case, that the variation
would unfairly prejudice the shareholders of the class represented by the
applicant.
3. An application under sub-section (2) may be made on behalf of the shareholders
entitled to make it by such one or more or their number as they may authorise in
writing in this behalf.
4. The decision of the Court on any such application shall be final.
5. The company shall, within 15days after the service on the company of any order
made on any such application, forward a copy of the order to the registrar and, if
default is made in complying with this provision, the company and every officer of
the company who is knowingly and wilfully in default shall be liable to a fine which
may extend to 200rupees for each day during which the default continues.
6. The expression variation includes abrogation, revocation or enhancement.
7. Section 5 of the Limitation Act, 1908, shall apply to an application made under subsection (2).