Defenition of ShareThe capital of a company is divided into small parts and each part is known as a share. Section 2(46) of the Companies act, 1!6 has de"ned a share as follows #Share means share in the share capital of the company and incl$des stock, e%pect when adistinction &etweenstock and share is e%pressed or implied'. Nature of ShareThe shares of any mem&er in a company are mova&le property and they can &e transferred in the manner provided in the articles of the company (Section )2*. The term +,oods- as de"ned $nder Section 2(.) of the sale of ,oods act incl$des shares also.Share cannot &e transferred &y mere delivery like ordinary ,oods. The property in shares &elon, to the re,istered share holder and it cannot &e transferred to another person e%cept accordin, to the articles ofthe company whichmay place certain restrictions in this respect.Kinds of shares /efore the company act 1!6,wae passed, the company co$ld iss$e three types of shares0 (a) 12$ity Shares (&) 3reference shares (c) 4eferred share. /$t the Companies 5ct 1!6 a company can iss$e only two types of shares. (a) 12$ity share (&) 3reference share Section )6, as amended &y the companies (amended) act 2666, provides that new iss$es of share capital of accompany limited &y shares shall &e of two kinds namely(a)12$ity Share capital(&) 3reference share capital Types of sharesPreference share C$m$lative 7 non c$m$lative 3articipatin, 7 non participatin, Converti&le 7 non converti&le 8edeema&le 7 irredeema&leEquity share 9ith votin, ri,hts. 9ith di:erential votin, ri,hts. Share capital The term sharecapital refers to the amo$nt of money raised &y the iss$e of share. ;nder the Companies 5ct, the capital of a company refers to the followin,(1) )S$&scri&ed capital (4)Called?$p capital (!)3aid?$p capital (6)8eserve capitalAlternation of capital clause5lteration of share capital (Sections 4?.).8ed$ction of share capital (Sections 166?16!). 8eserved share capital or reserve lia&ility (Sections ). @ariations of the ri,ht of the share holders (Sections 166?16.).8eor,aniAations of capital (Sections>6?>1). Shareholders The term #share holder' refers to a person who holds shares in a company, while the term #mem&er' refers to a person whose name appears on the re,ister of the mem&er. Section 41 of the companies act 1!6 de"nes a mem&er a person who has si,ned the memorand$m of association, and every other person who a,rees in writin, to &ecome a mem&er and whose name is entered into the re,ister of mem&ers. Brdinarily, the terms #mem&ers 7 shareholder' are synonymo$s &$t, precisely, this is so only in the case of a company limited &y shares, a company limited &y ,$arantee and havin, a sharin, capital and an $nlimited company whose capital is held in de"nite shares. Modes of acquiring membership/y s$&scri&in, to the memorand$m/y a,reein, to p$rchase 2$ali"cation shares /y application and allotment /y transfer /y transmission of shares/y estoppel Who can be members or shareholders Cinor(is incompetent to enter into any contract) 3artnership Dirms(is not a le,al person 7partners may not remain constant) Dorei,ners(Dorei,n e%chan,e mana,ement act) =nsolvents($ntil his name appears on re,ister) Companies(if permitted &y its article) Carried women Tr$stees(not &o$nd to reco,niAe the e%istence of "rm) 8e,istered societies(Societies re,istration act 1)66) 3erson takin, shares in "ctitio$s name(Sec 6)?5) Eoint?holders.(two or more person)!ights of membersFe has a ri,ht to o&tain copies of memorand$m of association, articles of association and certain resol$tions and a,reements on re2$est and payment of the prescri&ed fees.(Sec.>* Fe has the ri,ht to have the certi"cate of shares held &y him within three months of the allotment. (Sec.11>*Fe has the ri,ht to transfer his shares or other interests in the company s$&Gect to the manner provided &y the articles of the company. (Sec.)2* Fe has the ri,ht to appeal to the Company Haw /oard when the company ref$ses or fails to re,ister the transfer of shares.(Sec.111* Contd.Fe is entitled to receive a copy of the stat$tory report.(Sec.21* Fe is entitled to receive a copy of ann$al reports.(Sec 21* Fe is entitled to receive notices of ,eneral meetin,s.Fe has the ri,ht to participate in the appointment of a$ditors and the election of directors at the ann$al ,eneral meetin, of the company.(Sec.224 7 22!* Fe has the ri,ht to make an application to the Company Haw /oard for callin, ann$al ,eneral meetin, if the company fails to call s$ch a meetin, within the prescri&ed time limits.(Sec. 16.*4e&ent$res ;niform parts of a loan raised &y a company are known as de&ent$res. Section 2(12) states that a +de&ent$re incl$des de&ent$re stock, &onds and any other sec$rities of a company whether constit$tin, char,e on the assets of the company or not-. 5 de&ent$re may &e de"ned as an instr$ment in writin,, si,ned &y the company $nder its common seal, acknowled,in, the de&t d$e &y it to its holders. =t may also &e mentioned in the instr$ment that the company shall pay &ack the money at a speci"ed date and that till the speci"ed date, the de&ent$reholder shall &e entitled to interest on the amo$nt lent to the company at a "%ed rate.Iinds of de&ent$res8e,istered de&ent$res and &earer de&ent$res.8edeema&le and irredeema&le de&ent$res. Sec$red and $nsec$red de&ent$res. Converti&le and non?converti&le de&ent$res.=ss$e of de&ent$res 5 private company can iss$e de&ent$res immediately after o&tainin, the certi"cate of incorporation. /$t a p$&lic company can iss$e de&ent$res only after o&tainin, a certi"cate of commencement of &$siness.(Sec.14(1)* The power to iss$e de&ent$res rests with the &oard of directors, &$t the power m$st &e e%ercised &y the &oard only &y means of resol$tion passed at a meetin, of the &oard .(Sec.22(1)* 4e&ent$res can &e iss$ed &y directors for any amo$nt a$thorised &y the articles, &$t the amo$nt shall not e%ceed the a,,re,ate of the paid?$p capital of the company and its free reserves e%cept with the consent of the company in ,eneral meetin,.(Sec.2>(d)* 4e&ent$res can &e iss$ed at par, at disco$nt or at premi$m. The companies 5ct does not lay down any restriction in this respect. 4e&ent$res may &e redeema&le at par or at premi$m, &$t their redemption at disco$nt is prohi&ited. =mportant points re,ardin, de&ent$resTransfer and Transmission of 4e&ent$resJ /earer de&ent$res are transfera&le &y mere delivery. The company keeps no records of transfers. 5 &earer de&ent$re is a ne,otia&le instr$ment and a person who ac2$ires it in ,ood faith and for val$e ,ets a ,ood title irrespective of any defect in the title of transferor. =f the de&ent$res are re,istered de&ent$res, they can &e transferred only in the manner laid down &y the conditions on the &ack of the de&ent$re &ond or in the articles.8e,ister and =nde% of 4e&ent$reholders 1very company shall keep a re,ister of the holders of its de&ent$res and enter therein the followin, partic$lars, namely (a) the name, address and the occ$pation of each de&ent$reholder0 (&) the de&ent$res held &y each holder, distin,$ishin, each de&ent$re &y its n$m&er and the amo$nt paid or a,reed to &e considered as paid on those de&ent$res0 (c) the date on which each person entered in the re,ister as a de&ent$reholder0 and (d) the date on which any person ceased to &e a de&ent$reholder (Sec.1!2(1)* 1very company havin, more than "fty de&ent$reholders shall keep an inde% of de&ent$res $nless the re,ister of de&ent$reholders is in s$ch form as in itself constit$tes an inde%. The company shall make necessary alteration in the inde% within fo$rteen days of the date on which any alteration is made in the re,ister of de&ent$reholders. The inde% shall contain a s$Kcient indication to ena&le the entries relatin, to a partic$lar de&ent$reholder to &e readily fo$nd.(Sec.1!2(2)*3rotection of =nterests of 4e&ent$reholders The Companies(5mendment) 5ct, 2666 seeks to protect the interests of de&ent$reholders &y insertin, three new sections 11.5, 11./, 11.C in the Companies 5ct, 1!6. These new Sections deals with the format of de&ent$re tr$st deed, appointment of de&ent$re tr$stees, d$ties and powers of de&ent$re tr$stees and lia&ility of the company to create sec$rity and 4e&ent$re 8edemption 8eserve for the redemption of de&ent$res.3$rchase &y Company of its Bwn Shares/$y?&ack of shares J 3rior to the Companies(5mendment)5ct,1,companies were not permitted to p$rchase their own shares $nless the conse2$ent red$ction of capital was e:ected and sanctioned in p$rs$ance of Sections 166 to 164 or section 462(Sec. ..).Section ..?5,introd$ced &y the Companies(5mendment)5ct,1 permits a company to p$rchase its own shares $nder a &$y?&ack scheme o$t of (1) its free reserves0 or (2) sec$rities premi$m acco$nt0 or (>) the proceeds of an earlier iss$e . This is s$&Gect to the followin, conditionsJ 1.The &$y?&ack is a$thoriAed &y the articles of the company 2.5 special resol$tion is passed in ,eneral meetin, of the company a$thoriAin, the &$y?&ack >.The amo$nt in the &$y?&ack shall not e%ceed twenty "ve percent of the total paid?$p capital and free reserves of the company 4.The ratio of the de&t owed &y the company is not more than twice the capital and its free reserves after s$ch &$y?&ack !.5ll the shares to &e &o$,ht?&ack are f$lly paid?$p 6.The &$y &ack of shares listed on any reco,niAed stock e%chan,e sho$ld &e in accordance with the re,$lation made &y S1/=Contd. ..1very &$y?&ack shall &e completed within twelve months from the date of thespecial resol$tion ).5 declaration of solvency shall &e "led &y the company with the 8e,ister and S1/= .The shares &o$,ht?&ack shall &e e%tin,$ished and destroyed physically within seven days of the last date of completion of &$y?&ack 16.9here a company &$ys?&ack it shares , it shall not make f$rther iss$e of the same kind(incl$din, ri,ht iss$e)within a period of si% months e%cept &y way &on$s iss$e 11.The company shall maintain a re,ister containin, the partic$lars of sec$rities &o$,ht?&ack 3rospect$s5fter o&tainin, the certi"cate of incorporation the promoters will take steps to raise the necessary capital "r the company. /asic o&Gective of iss$in, of a prospect$s is to arose a p$&lic interest in the proposed company and ind$ce the ,eneral p$&lic to &$y its shares and de&ent$res.Section 2(>6) de"nes prospect$s as # any doc$ment descri&ed or iss$ed as prospect$s and incl$des any notice, circ$lar, advertisement and other doc$ments invitin, deposits from p$&lic. 8$les re,ardin, iss$e of prospect$s4atin, of prospect$s J 5 prospect$s iss$ed &y a company sho$ld &e dated and the date sho$ld &e taken as the date of p$&lication of the prospect$s. 8e,istration of prospect$sJ