Dematerialised Securities and Share Certificates
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Dematerialised Securities and Share Certificates

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Questions and Answers

What effect does Section 43 have on Section 47 regarding voting rights for holders of equity share capital with differential rights?

  • It eliminates voting rights for those with differential rights.
  • It reinforces proportional voting based on shareholding.
  • It allows voting rights as per clauses in the articles of association. (correct)
  • It mandates equal voting rights for all shareholders.

    • Under what conditions does a holder of preference shares have the right to vote on resolutions concerning their shares?

  • When the company is not paying dividends for a period of two years or more.
  • Only if they hold a majority of preference shares.
  • For resolutions that affect their rights on the preference shares or for winding up. (correct)
  • On all resolutions regardless of their content.

    • How is the voting right of preference shareholders determined in the case of a poll?

  • Based on seniority in the company.
  • In proportion to their share in the paid-up equity capital.
  • In proportion to their share in the paid-up preference share capital. (correct)
  • Equally among all preference shareholders.

    • What does the First Proviso to section 47 (2) state regarding voting rights between equity and preference shareholders?

    <p>Voting rights are determined by the proportion of paid-up capital.</p> Signup and view all the answers

    When are preference shareholders empowered to vote on all resolutions placed before the company?

    <p>If the dividends for their class of shares have been unpaid for two years or more.</p> Signup and view all the answers

    What is required of every unlisted public company under Rule 9A regarding securities issuance?

    <p>To issue securities in dematerialised form only.</p> Signup and view all the answers

    What does a company need to provide when issuing a renewed share certificate?

    <p>Surrender of the original certificate.</p> Signup and view all the answers

    What must be stated on the face of a duplicate share certificate?

    <p>Duplicate issued in lieu of share certificate No......</p> Signup and view all the answers

    What fee can a company charge for issuing a renewed or duplicate share certificate?

    <p>Up to Rupees fifty per certificate.</p> Signup and view all the answers

    In which situation can a company replace existing certificates without requiring the old certificates to be surrendered?

    <p>Upon a merger or demerger.</p> Signup and view all the answers

    What is the condition for issuing a duplicate certificate if the original is lost or destroyed?

    <p>Consent from the board based on evidence must be produced.</p> Signup and view all the answers

    Which of the following statements is true about the issuance of a renewed share certificate?

    <p>It must state that it is issued in lieu of the original certificate.</p> Signup and view all the answers

    What should be included on the duplicate certificate to ensure clarity?

    <p>The word 'duplicate' stamped or printed prominently.</p> Signup and view all the answers

    What happens to a deceased shareholder's shares?

    <p>They are transmitted to the legal representative.</p> Signup and view all the answers

    In the case of insolvency, where do a shareholder's shares go?

    <p>To the Official Receiver.</p> Signup and view all the answers

    What is the role of a legal representative in the transfer of shares from a deceased person?

    <p>They act as a substitute holder for transferring shares.</p> Signup and view all the answers

    What is required for a valid transfer of shares by a legal representative?

    <p>A duly stamped instrument of transfer and succession certificate.</p> Signup and view all the answers

    What is a succession certificate in the context of share transfer?

    <p>A document that provides evidence of ownership of shares.</p> Signup and view all the answers

    Which of the following scenarios does NOT lead to the transmission of shares?

    <p>Erasure of shareholder records.</p> Signup and view all the answers

    If Richa Daniel wishes to transfer her deceased father's shares, what must she provide to Speed Software Limited?

    <p>A duly stamped instrument of transfer and succession certificate with share certificates.</p> Signup and view all the answers

    What is the purpose of transferring a sum equal to the nominal amount of shares redeemed to the Capital Redemption Reserve?

    <p>To maintain the sanctity of paid-up share capital</p> Signup and view all the answers

    What can Richa Daniel do instead of transferring the shares through her legal representation?

    <p>Choose to register herself as the holder of the shares.</p> Signup and view all the answers

    In the case of Vintee Lifestyles Garments Limited, how much was transferred to the Capital Redemption Reserve for redeeming 20,000 preference shares at a nominal value of ₹100 each?

    <p>₹20,00,000</p> Signup and view all the answers

    Which of the following statements is correct regarding the redemption of preference shares?

    <p>New shares can be issued up to the nominal amount of shares redeemed.</p> Signup and view all the answers

    What should be done with any amount paid towards the premium on redemption of preference shares?

    <p>It must be provided from the company's profits before the shares are redeemed.</p> Signup and view all the answers

    Why must the amount in the Capital Redemption Reserve be maintained with the same sanctity as paid-up share capital?

    <p>To protect shareholders' equity and uphold company legality</p> Signup and view all the answers

    Redemption of preference shares is not considered a reduction of authorized share capital because:

    <p>The company replaces redeemed shares with newly issued shares.</p> Signup and view all the answers

    What is the basis for the Capital Redemption Reserve to be reduced?

    <p>In a manner similar to how paid-up share capital can be reduced</p> Signup and view all the answers

    What must a company do if it plans to redeem shares and the profits are not sufficient?

    <p>Postpone the redemption until profits increase</p> Signup and view all the answers

    What does authorized capital mean in a company context?

    <p>The maximum amount of share capital authorized by the memorandum of a company</p> Signup and view all the answers

    Under which Act can the Tribunal direct the alteration of a company's register or records?

    <p>Securities Contracts (Regulation) Act, 1956</p> Signup and view all the answers

    What is called-up capital in a company?

    <p>The part of the capital that has been called for payment</p> Signup and view all the answers

    What is required for a limited company to alter its capital clause in the memorandum of association?

    <p>Authority provided by the company's articles</p> Signup and view all the answers

    Which of the following actions can lead to the suspension of voting rights?

    <p>A Tribunal order suspending rights</p> Signup and view all the answers

    Which of these capital types is defined by Section 2(8)?

    <p>Authorized Capital</p> Signup and view all the answers

    What is a bonus issue?

    <p>New shares issued to shareholders without payment</p> Signup and view all the answers

    Which section primarily governs the power of limited companies to alter their share capital?

    <p>Section 61</p> Signup and view all the answers

    Study Notes

    Dematerialised Securities

    • Every unlisted public company is required to issue securities only in dematerialised form and facilitate the dematerialisation of all existing securities. This requirement was introduced through the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018, coming into effect on 2-10-2018.

    ### Renewed/Duplicate Share Certificate

    • A company can issue a renewed share certificate to replace a defaced, mutilated, or torn original certificate. The company will require surrender of the original certificate before issuing a renewed certificate.
    •  A company can replace all existing certificates with new ones after sub-division or consolidation of shares or merger or demerger, without requiring the surrender of old certificates.
    •  The renewed certificate must state that it is "Issued in lieu of share certificate No.....sub-divided/replaced/on consolidation."
    •  Companies can charge a fee for issuing a renewed certificate, not exceeding `50 per certificate. No fee is required for certificates issued under a scheme of arrangement sanctioned by the High Court or the Central Government.
    •  If a shareholder has lost or destroyed their share certificate, they can apply for a duplicate certificate. The board of directors must approve the issuance of the duplicate certificate based on evidence presented by the shareholder.
    •  Companies can charge a fee for issuing a duplicate certificate, not exceeding `50 per certificate.
    •  Duplicate certificates must clearly state that they are "duplicate issued in lieu of share certificate No......" and prominently stamp or print the word "duplicate."

    ### Voting Rights

    •  Members holding preference shares have the right to vote on resolutions that directly affect the rights attached to their preference shares.
    •  Preference shareholders also have the right to vote on resolutions for the winding up of the company or for the repayment or reduction of equity or preference share capital.
    •  Preference shareholders' voting rights on a poll are proportional to their share in the paid-up preference share capital of the company.
    •  If dividends on a class of preference shares have not been paid for two years or more, preference shareholders have the right to vote on all resolutions placed before the company.
    •  When both equity shareholders and preference shareholders are entitled to vote, the proportion of their voting rights is in the same proportion as the paid-up capital in respect of the equity shares bears to the paid-up capital in respect of the preference shares.

    ### Redemption of Preference Shares

    •  Preference shares can be redeemed out of:
      • Profits of the company.
      • Proceeds of a fresh issue of shares made for the purpose of redemption.
    •  Shares to be redeemed must be fully paid.
    •  When redeeming preference shares out of profits, a sum equal to the nominal amount of the shares to be redeemed must be transferred to a reserve called "Capital Redemption Reserve." This amount is maintained with the same sanctity as paid-up share capital, and can only be reduced in the same manner as paid-up share capital.
    •  Redemption of preference shares is not considered a reduction of the company's authorised share capital.
    •  The company can issue new shares up to the nominal amount of the shares redeemed, and the capital will not be deemed to have been increased.
    •  Premium payable on redemption of preference shares for companies whose financial statements comply with accounting standards prescribed under section 133 must be provided for out of the company's profits before the shares are redeemed.

    ### Transmission of Shares

    •  Transmission of shares occurs in cases including death, insolvency, and lunacy of the shareholder.
    •  A transfer of any security or interest in a company made by the legal representative of a deceased person is valid as if the legal representative were the holder at the time of the execution of the transfer instrument.
    •  The company, upon receipt of a duly stamped instrument of transfer, along with the requisite share certificates and succession certificate, must transfer the shares in favour of the designated recipient.
    •  Persons acquiring shares through transmission are entitled to voting rights unless those rights have been suspended by a Tribunal order.

    ### Transfer of Securities Contravening Laws

    •  The Tribunal can direct a company or depository to rectify its register or records when the transfer of securities contravenes:
      • The Securities Contracts (Regulation) Act, 1956.
      • The Securities and Exchange Board of India Act, 1992.
      • The Companies Act, 2013.
      • Any other applicable law.

    ### Alteration of Share Capital

    •  A limited company with share capital can alter the capital clause of its memorandum of association in the following ways, provided the articles of association grant authority to alter:
      • Increase share capital.
      • Reduce share capital.
      • Buy back shares.
      • Issue bonus shares.
      • Issue rights shares.

    ### Definitions

    •  "Authorised Capital" or "Nominal Capital" refers to the maximum amount of share capital that a company is authorized to issue as per its memorandum of association.
    •  "Called-up Capital" refers to the portion of share capital that the company has called for payment from shareholders.

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    Description

    This quiz covers the essential aspects of dematerialised securities as per the Companies (Prospectus and Allotment of Securities) Third Amendment Rules, 2018. It also discusses the process of issuing renewed or duplicate share certificates and the conditions under which they are provided. Test your knowledge on these crucial topics in company law.

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