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Questions and Answers
When are shares typically issued?
Under what circumstances is prior approval of the company NOT required for issuing shares?
What is the validity period of the approval for issuing shares under section 76(3)?
Under what circumstances can directors allot shares after the approval has expired?
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What happens if a company issues shares in contravention of section 75?
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What is the definition of 'share' according to section 2(1)?
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What are Control Rights in the context of shareholding?
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How are shares different from debts?
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What do financial rights entitle shareholders to?
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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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Description
Test your knowledge about share capital, classes of shares, and variation procedures as per the definition of 'share' under section 2(1) of the law. Explore concepts like the representation of shareholder interest, liability, dividends, and more.
