Page 146 - DCOM106_COMPANY_LAW

Unit 9: Share and Share Capital

9.10 Keywords Notes

Cumulative Preference Share: If a preference share carries the right for payment of arrears of
dividend from future profits, then such a share is known as cumulative preference share.

Equity Share: ‘Equity share’ means a share which is not a preference share (s.85). The rate of
dividend is not fixed.
Non-voting Share: ‘Non-voting shares’ as the term suggests, are shares which carry no voting
rights. These are contemplated as altogether a different class of shares which may carry additional
dividends in lieu of the voting rights.
Redeemable Share: A preference share which can be redeemed upon the resolution of the board
of directors, if the articles so provide, is known as redeemable preference share.

Share: A share is the share capital of a company and includes stock except where a distinction
between stock and share is expressed or implied.
Stock: The term ‘stock’ may be defined as the aggregate of fully paid-up shares of a member
merged into one fund of equal value.

9.11 Review Questions

1. Define a share.
2. What are the different types of shares which a company can issue?

3. How and subject to what conditions can loans and debentures be converted into shares?
4. How and for what purposes can a company alter its share capital?
5. Discuss the procedure for reduction of share capital.
6. A company limited by shares intends to buy some of its own shares. Advise.
7. Explain the three different ways through which issue of shares may be made by a public
company.
8. Explain the provisions as regards increase of subscribed capital by a public company by
allotment of further shares.
9. In what way does the Companies, Act, 1956 regulate the issue of shares at a premium?
State the purpose for which the share premium so charged can be utilized. To what extent
it is possible for a company to issue shares at a premium for consideration other than cash?
10. State the circumstances wherein shares of a company can be issued at a discount. What is
the liability of directors for improper issue of shares at discount?
11. Explain the meaning of ‘Sweat equity shares’. State the conditions a company has to fulfill
for issuing such shares.

12. Comment on the following:
(i) A company is prohibited from buying its own shares or financing the purchase
thereof.

(ii) A company cannot reduce its share capital without the sanction of the court.
(iii) Section 81 is intended to prevent the directors from offering shares to outsiders
before an offer is made of further issue of capital as a right to the existing
shareholders.

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