Page 122 - DCOM106_COMPANY_LAW

Unit 9: Share and Share Capital

Notes
9.9 Summary
9.10 Keywords
9.11 Review Questions

9.12 Further Readings

Objectives

After studying this unit, you will be able to:
Define shares;

Explain the various kinds of shares;
Describe the equity share;
Know the share capital;
Describe share capital alteration;
Know reduction of share capital.

Introduction

In the case of an unlimited company, the articles shall state the number of members with which
the company is to be registered and, if the company has a share capital, the amount of share
capital with which the Company is to be registered.
In the case of a company limited by guarantee, the articles shall state the number of members
with which the company is to be registered.
In the case of a private company having a share capital, the articles shall contain provisions
relating to the matters specified in sub-clauses (a), (b) and (c) of clause (iii) of sub-section (1) of
section 3; and in the case of any other private company, the articles shall contain provisions
relating to the matters specified in the said sub-clauses (b) and (c). [S. 27]

9.1 Shares

Section 2(46) defines a share as “a share in the share capital of a company and includes stock
except where a distinction between stock and share is expressed or implied”.
This definition does not bring out the meaning of a share in its true perspective.

A share signifies the following:
The interest of a shareholder in the company; the right to receive dividend, attend meetings,
vote at the meeting and share in the surplus assets of the company, if any, in the event of
the company being wound up [Bacha F. Guzdar vs. Commissioner of Income Tax, Bombay,
L. R. 617 SC];

The liability of the shareholder in the company to pay calls on shares until fully paid up;
The right of the shareholder to transfer the shares subject to the articles of association (For
this purpose s.82 classifies shares as movable property, transferable in the manner provided
in the articles);
Binding covenants on the part of the company as well as the shareholder, as given in the
articles of the company.

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