FINANCIAL STRUCTURE AND MEMBERSHIP - I - CONCEPT OF CAPITAL AND FINANCING OF COMPANIES.

FINANCIAL STRUCTURE AND MEMBERSHIP - I

CONCEPT OF CAPITAL AND FINANCING OF COMPANIES.

“A share in the share capital of a company, and includes stock except where a distinction between stock and shares is expressed or implied” [Section 2(46)]

Company Limited by shares issue two classes of shares (Section 86)

1. Preference Share Capital (Section 85[1])

                     i)        Participating and Non – participating

                     ii)       Cumulative and Non – cumulative

                     iii)     Redeemable and Non – Redeemable

       2.       Equity  Share Capital (Section 85 {2}

       3.       Sweat Equity Shares – Issue of class of shares already issued - (Section 79A)

An eligible company shall be free to make public or rights issue of equity shares in any denomination determined by it in accordance with Sub – section (4) of Section 13 and in accordance with following and other norms as may be specified by SEBI

Promoters Contribution –

Not less than 20% of post – issue capital

Lock in period of 3 years from the date of commencement of commercial production or date of allotment in the public issue whichever later.

Any contribution made by promoters over and above the minimum contribution shall be subject to a lock in period of 1 Year

Underwriting –

If the issue is underwritten, the lead merchant banker should accept a minimum underwriting obligation of 5 % of the total underwriting commitment or Rs. 25 Lakhs whichever is less.

Minimum Offer to Public –

Public issue of Unlisted Company – at least 10% or 25% of the post issue capital

Issue to be made fully Paid – up

Entire subscription money is called within 12 Months from the date of allotment unless the size is more than Rs. 500 Crore

 Issue to be Open-

Within 3 months from the date of issuance of observation letter by SEBI 

Post issue monitoring report-

Information to Lead merchant bankers a 3 day and 78 post issue monitoring report.

Book Building -

A process undertaken by which a demand for the securities proposed to be issued by a body corporate is build up and a ‘FAIR PRICE’ and ‘QUANTUM ‘of securities issued finally.

Minimum public offer of 20 lakhs securities through Book building process – allocation of 50% made to Qualified Institutional Buyers.

Making application to Stock Exchange for permission to listing – Section 73(1)

Printing and Distribution of Prospectus and application forms - Section 64(4)

Issuance of Share Certificate – Section 113

Issue of Shares at Discount – Section 79

Further issue of shares – “Right Issue of Shares” - Section 81 - Any time after expiry of two Years from the Incorporation or one year from first allotment

Employees Stock Option Scheme – Section 2 (15A)

Option given to Whole Time Directors, Officers or Employees of a company, which gives right/benefit to purchase at future date at pre-determined price.

Alteration of Share Capital – Section 94

Increase, Consolidate, Divide, Convert, Cancel

Power of Alteration – Can be exercised by the members only if authorized by Articles.

Conversion of Shares into Stock - Section 96

The provision of the Act governing the shares shall cease to apply to the share capital as it is converted into stock

Reduction of Share Capital – Section 100 - Reduction of Liability Unpaid, Extinguishment of Liability, Paying Off, Purchase of Shares, Cancellation .

Diminution of Capital – Section 94(1) (3) - Company cancels shares which have not been taken or regard to be taken by any person.

Purchase of Shares of a member by the Company - Section 402

Buy – back of its own share – Section 77A