Podcast
Questions and Answers
When are shares typically issued?
When are shares typically issued?
- Dividend reinvestment plan
- Rights issue
- Initial Public Offering (IPO) (correct)
- Bonus issue
Under what circumstances is prior approval of the company NOT required for issuing shares?
Under what circumstances is prior approval of the company NOT required for issuing shares?
- For shares allotted to existing members proportionately
- For shares issued through a dividend reinvestment plan (correct)
- For shares allotted to the promoter
- For shares issued as consideration for the acquisition of assets by the company
What is the validity period of the approval for issuing shares under section 76(3)?
What is the validity period of the approval for issuing shares under section 76(3)?
- Until the expiration of the AGM period for companies not required to hold AGM
- Not more than 12 months after the approval was given (correct)
- Until the end of the financial year
- Until the next Annual General Meeting (AGM) for companies required to hold AGM
Under what circumstances can directors allot shares after the approval has expired?
Under what circumstances can directors allot shares after the approval has expired?
What happens if a company issues shares in contravention of section 75?
What happens if a company issues shares in contravention of section 75?
What is the definition of 'share' according to section 2(1)?
What is the definition of 'share' according to section 2(1)?
What are Control Rights in the context of shareholding?
What are Control Rights in the context of shareholding?
How are shares different from debts?
How are shares different from debts?
What do financial rights entitle shareholders to?
What do financial rights entitle shareholders to?
What does the term 'interests' refer to in the context of shareholding?
What does the term 'interests' refer to in the context of shareholding?
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Study Notes
Share Issuance
- Shares are typically issued when a company needs to raise capital or reward investors.
Exceptions to Prior Approval
- Prior approval of the company is NOT required for issuing shares when it's done through a private placement, employee stock option scheme, or an issue of sweat equity shares.
Validity Period of Approval
- The approval for issuing shares under section 76(3) is valid for a period of 1 year from the date of the resolution.
Allotment of Shares after Approval Expiry
- Directors can allot shares after the approval has expired only if the approval is renewed by the company's members through a special resolution.
Consequences of Contravention
- If a company issues shares in contravention of section 75, the allotment of shares will be void.
Definition of a Share
- A 'share' is defined as a share in the share capital of a company, including stock, and comprises the interest of a shareholder in the company.
Control Rights
- Control Rights in the context of shareholding refer to the power of a shareholder to influence the company's operations, management, and direction.
Shares vs. Debts
- Shares are different from debts in that they represent ownership in a company, whereas debts represent a creditor's claim on the company's assets.
Financial Rights
- Financial rights entitle shareholders to receive a portion of the company's profits in the form of dividends and to participate in the distribution of the company's assets upon its winding up.
Interests in Shareholding
- The term 'interests' in the context of shareholding refers to the rights and benefits that come with owning shares in a company, including control rights, financial rights, and voting rights.
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