Page 284 - DMGT407Corporate and Business Laws

Unit 11: Prospectus, Shares and Share Capital

A copy of the prospectus duly signed by every director or proposed director must be Notes
delivered to the registrar before its publication.

Sections 100-105 provide for the reduction of share capital. A company limited by shares,
if so authorised by its articles, may, by special resolution, which is to be confirmed by the
Court

If a public company makes a private arrangement for raising its capital, then it must file a
statement in lien of prospectus with the registrar at least three days before any allotment
of shares of debentures can be made.
In response to the issue of the prospectus the company receives applications for shares.

11.7 Keywords

Bonus Share: The company pays a bonus to its shareholders in the form of shares; a free share
thus issued.
Deferred Shares: They are normally held by promoters and directors of the company & are of
smaller denomination, say one rupee each.
‘Employee Stock Option’: It means the option given to the directors, officers or employees of a
company to purchase or subscribe at a future by a date, the securities offered company at a
predetermined price.
Preference Share: A preference share is one which carries the following two rights over holders
of equity shares: (i) a preferential right in respect of dividends at a fixed amount or at a fixed rate,
and (ii) a preferential right in regard to repayment of capital on dividing up.
Prospectus: It means any document described or issued as prospectus and includes any notice,
circular, advertisement or other document inviting deposits from the public or inviting offers
from the public for the subscription or purchase of any shares in or debentures of a body
corporates.
Share: A share is a share in the share capital of a company and includes stock except where a
distinction between stock and share is expressed or implied.

Share Certificate: It is a certificate, under the common seal of the company, specifying any
shares held by any member.
Underwriting: It consists of an undertaking by a person that if the public fails to take up the
issue, he will do so.

11.8 Review Questions

1. You are the managing director of the company and you wanted to alter the share capital of
your company. Elucidate the procedure you will follow to do the same.
2. A company, in which the directors hold majority of the shares, altered its articles so as to
give power to directors to require any shareholder, who competed with the company’s
business, to transfer his shares, at their full value, to any nominee of the directors. S had
some shares in the company. Is S bound by the alteration?

3. Neha, due to some reason wanted to reduce the share capital of her company. She comes
to you for the advice. Advise her and tell her the procedure for the same.
4. A company limited by shares intends to buy some of its own shares. Advise.

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