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by : DR. T.K. JAIN AFTERSCHOOL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR PGPSE PARTICIPANTS mobile : 91+9414430763
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Sec. 2(46) :
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Equity preference (preference in dividend, wind up etc. ) sweet equity (for employees) share warrant (right to buy shares in future) right shares (right of existing shareholders to buy share) bonus share (freely given to existing shareholders)
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Types of shares :
Types of capital
Authorised / nominal/ registered (mentioned in MOA) issued subscribed called up paid up reserve
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1999 amendment brought Sec. 77A,77AA,77B, which allowed buy back and deleted 77(1), 77(2) which didnt allow buy back
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To increaase EPS where there is surplus profit When company has excess funds / liquidity to defend company from possible takeover bids to provide exit route to shareholders to increase market value of shares
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Out of free reserves or out of security premium account or out of proceeds of fresh equity issues
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In 6 months company cant issue bonus / fresh issue / convert warrants into equity / sweat equity fill up form 4a & 4b must be filled with ROC ratio of debt equity ratio 2:1 read : www.sebi.gov.in/faq/buybackfaq.htm www.legalserviceindia.com/articles/shares.htm
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Penalty
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Case: Sterlite
Buy back under sec 77A cannot be overriding to powers of the court under Sec. 100,101, 391 and therefore buy back cant be unilateral. Read : http://www.financialexpress.com/news/hc-admits-dc
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How to value / price sweat equity shares ? VERMA COMMITTEE RECOMMENDATIONS http://www.hinduonnet.com/2002/10/04/stories/200 www.financialexpress.com/printer/news/55236 / - Angola
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BONUS ISSUES
It is for FULLY PAID UP shares http://dpe.nic.in/newgl/glch0312.htm authorised by AOA sanctioned by ordinary resolution out of free reserves (not from revaluation of fixed assets) .
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Share allotment
Allotment must be unconditional within reasonable time sec : 73(1A),69,72,73 and 70 must be followed issue of prospectus, minimum subscription, min. Application money etc. Must be followed apply to stock exchanges and take permission otherwise allotment will be void (if Stock exchange refuse, apply to SAT) .
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Minimum subscription
90% - in 120 days from prospectus otherwise return in 130 days othersie interest 6% as per SEBI guidelines, these rates have changed so read latest SEBI guidlines www.sebi.gov.in/commreport/rep245.html www.sebi.gov.in/acts/ipguidelines.pdf
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Calls
Make a call - at least 5% on application, (minimum 25%) board resolution must be passed 14 day notice for calls interval of 1 month between two calls sec. 92 : advance call may be taken up
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Forfeiture
At least 14 day notice AOA must authorise Board resolution is necessary a person is responsible for unpaid money even after forfeiture of his shares
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Underwriting commission
2.5% on debentures 5% on shares must be mentioned in prospectus agreement with underwriter must be submitted to ROC
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Sebi guidelines
http://www.sebi.gov.in/SectIndex.jsp?sub_sec_id=4
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Issue norms
Issue norms must be given in prospectus. Issue must be made in 30 days of public issue closure (otherwise penal interest @15%) refund orders (if any must be despatched in 78 days). Allotment must be made by board of directors / proper authority
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Transfer of shares
Now it is through Demat (NSDL or CDSL) so it is a request to these Demat companies to transfer the shares , but earlier you had to sign a transfer deed sec 108, to 111A gave details of transfer of shares - which was applicable in the case of physical shares.
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Nomination
Every shareholder can nominate a person as per sec. 109A. Thus if a person dies, his nominee will get the shares. Nominee can be minor also.
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GOLDEN RULE
Kindersely : in Brunswick etc. v/s Muggeridge (1860) : the person issueing prospectus must give every information stricktly and scrupulously and must not omit any material information
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Important rules
Experts opinion only after obtaining written consent by experts Director names only after obtaining written consent by director to become the director the experts mentioned must not be connected to formation of the company (indemnify if there is false information)
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company (within 30 days) 2. when public company is not issueing shares to public, they have to issue this. 3. when a public company doesnt allot shares to public it must have contents similar to prospectus, penalty if untrue statement : 10000 http://www.vakilno1.com/bareacts/companiesact/s44
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BE A PROMOTOR
A Promotor is a person who sets up a company. As a promotor, you have to think about the idea and convert this idea into a company. As a promotor, you have to set up initial contracts so that company becomes operational.
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Steps ......
Prepare Memorandum of association (as per format) in at least 3 copes Prepare Articles of association (as per format) in at least 3 copes (or apply Table A of schedule I) Prepare agreements with directors Submit declaration to Registrar of company that all formalities have been fulfilled (by company secretary) prepare prospectus go ahead for raising money for your dream ideas
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LEGAL FORMS
Form NO. 1 : declaration of all the formalities of company (to be filed with registrar of comapnies ). for other forms and their structure, click on the following link : http://www.mca.gov.in/MCA21/dca/downloadeform http://www.vakilno1.com/froms_html/co_form.htm
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