Generally, for every business we need an investment or capital in order to carry out the operations, purchases and other purposes. In companies, the capital or investment is required and such money is raised from the capital market, SEBI has fixed the guidelines regarding how to raise a fund and the procedure. Companies act, 2013 lays 4 types of raising funds public issue, rights issue, bonus issue and private placement. Where the public issue can be an initial public offer or follow up the public offer. A private issue where the offer to the selective investors like banks, insurance companies, etc. The difference between private and public, is public is an open offer and private is only for the selective investors. A Rights issue is offering the shares to the existing shareholders on a ratio basis. Bonus issues were the issue of shares to the already existing shareholders without any additional costs. All shares are subjected to stamp duty.
S.2(28) of the Companies Act, 2013 defines the term ‘shares’ which means a share in the share capital of the company, which clears that a sum of shares results in share capital. The share capital of the company is divided into the number of indivisible units of a fixed amount. Such units are shares. The shares also have nature of movable property and which can be transferable. S.43 of the act defines the types of share capital, which are two types equity share capital and preferred share capital.
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Equity shares where the holders don’t enjoy any preference rights, but they have right to vote and have control on working of the company (s.47). Their dividends are not fixed and they are paid only after all claims like debt, interest, preference share capital etc. Equity shares are quite risky because it depends upon the return of the company. Preferred shares were the holders have certain preference rights, their dividends are fixed and payable before equity shares. In case of company bankrupt, the preference holders need to settled first from the asset of the company. The company as a proof of such issuance need to provide a share certificate using its common seal of the company, which will the prima facie of such issuance, such certificate should be in Form No SH-1. The issue of certificate main object is to estoppel the company from denying such issuance.
As stated earlier shares have the nature of movable property, u/s72 it mandates the shareholders to mention about the nominee who can get the right over the shares after his death. Forfeiture of shares also can be done but it should be as mentioned in Table F of Article of Association. S.56 states about the procedure regarding the transfer of shares, it expresses a share can’t be transferred without a proper transfer deed in Form SH-4 as given in Rule 11 of Companies Rules 2014, and there are various restrictions exists in transferring. While transferring the shares are subject to stamp duty. The company has the power to refuse the registration of transfer (s.58) and the transferee can go for appeal against such refusal to National Company Law Tribunal.
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