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TYPE OF ISSUES

PUBLIC RIGHTS BONUS PREFERENTIAL


ISSUE ISSUE ISSUE ISSUE

Public Issue: Issue made to the public as whole requires filing


prospectus with ROC, application to the stock exchange for listing
and compliance with SEBI (DIP) Guidelines. [Public, if invitation is
made to person exceeding 49 in number as per Sec 67(3)]. It
includes Initial Public Offer (IPO), Follow-on Public Offer (FPO), et
al.

Rights Issue: Issue made to existing shareholders


proportionately with right to renounce thereof [Sec 81(1)]. Listed
companies to file letter of offer with stock exchanges and comply
with SEBI (DIP) Guidelines and to send abridged letter of offer to
shareholder.

Bonus Issue: Issue made to existing shareholders where shares


are issued (freely) as fully paid, out of securities premium account
and free reserves. Listed companies cannot issue out of revaluation
reserves and to comply with Chapter XV of SEBI (DIP) Guidelines.
[proviso to Sec 205(3), Sec 78 & Sec 80].
Note: Student may note that Reliance Power Limited recently issued
bonus shares in which the promoters waived of their rights to
participate in the bonus issue by a written letter to the company
and the company passed a special resolution in this regard.

Preferential Issue: Unlisted companies can make private placement


of equities or any other convertible instrument on complying with
section 81(1A) read with Unlisted Public Companies (Preferential
Allotment) Rules, 2003.

Preferential Issue / QIP: Listed company making preferential issue


or make qualified institutional placement (QIP) [made only to QIB]
shall comply with sec 81(1A) and shall comply with Chapter XIII or
Chapter XIIIA of SEBI (DIP) Guidelines respectively, which includes
pricing provisions, lock-in conditions, time within which the
resolution as to be acted upon, certification etc…

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APPOINTMENT OF DIRECTORS BY BOARD

ADDITIONAL DIRECTORS u/s. 260

AoA may prescribe, Provisions:


Yes, Directors can 1. AoA should authorize;
themselves appoint an 2. UPTO Total Strength of BoD;
Additional Director but 3. By Board / Circular Resolution;
NOT exceeding the 4. Retire @ the ensuing AGM.
Strength of the Board.

DIRECTORS APPOINTED IN CASUAL VACANCY u/s. 262


1. Applicable ONLY for Public Limited Company;
2. ONLY if Member Director (Dir appointed by Mem) dies, resigns,
etc...
3. By Board Resolution (NOT Circular Resolution);
4. Term will be the term of the Director in whose place he is
appointed; (Retire once Original Director term gets over).

ALTERNATE DIRECTORS u/s. 313

Provisions:
1. AoA should authorize;
2. ONLY if Original Director is outside State for more than 3 months;
3. By Board / Circular Resolution [Not by Director];
4. Vacates if Original returns to the State or Orig Dir term expires;
5. Single Individual may act as Alternate to more than 1, then he
will get such No. of Votes but with single Sitting Fees.

Note:
1. AoA may specify Share Qualification;
2. On appointment, Original will get deemed Leave of Absence;

S.N Particulars Sec. 260 Sec. 262 Sec. 313


1 Provides for Additional Directors in Alternate
. Appointment Director Casual Directors
of Vacancy
2 Applicability All companies Only Public All companies
. Limited
3 Articles [AoA] Shall - Shall authorize
.3 authorize or or amend AoA

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Understand DEFINITIONS

MD – Sec. 2(26)

“means” “includes” Following are NOT


Substantial
A DIRECTOR A DIRECTOR Powers
ENTRUSTED occupying the 1. Affixing Common
with Substantial position of MD, by Seal;
Powers whatever
of Mgmt THRO- name called. 2. Operation of
Agreement/ Bank of A/C.
GM Resol/Bd Resol/
MoA/AoA. “SUBJECT TO”
3. Endorse/Sign/
superintendence,
Register a
control
Sh. Certificate
& direction of the
Board.

WTD-Explanation
to Sec. 269

“includes”
A DIRECTOR in the Whole
Time employment of the Co.

((Employee as a Dir))

Manager
Sec. 2(24)

“means” “includes” “SUBJECT TO”

An INDIVIDUAL A DIR/an superintendence,


on whom Individual control & direction
whole of the occupying the of the Board.
powers of mgmt position of
DEVOLVES. Mgr, by whatever
name called.
((Employee as a
BOARD MEETING (BM)

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Meeting of Brains = Board Meeting [BM]

CONSENT OF THE BOARD

Thro
@ the Circula
meeting r Resol
of BoD (CR)
SECTIONS
[S.289]
262
Sec. 292
293A
Calls on Shares
Buy-Back UPTO
297 & 299 BALANCE ITEMS
10% (PC+FR)
Borrowing thro
316 & 386 The remaining items
Debentures
& Others can be passed either
372A through Circular
Make
Investments & Resolution OR Board
488 Resolution [@ the
Loans
PC – Paidup Capital meeting of the
FR – Free Reserves Board]

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DIVIDENDS
Dividend = Return on Investment (RoI) in Capital;

Pay First Preference (shares), Then Equity;

Payment is an Ordinary Business (OB) requiring Ordinary Resolution


(OR);

FINAL DIVIDEND
[at the AGM]
INTERIM DIVIDEND
[between 2 AGMs]
Recommended by Board
[BoD]
Recommended by Board
[BoD]
UPTO BoD’s
recommendation [if, Table
DECLARED by BoD
A] may be DECLARED by
Shareholders.

Dividend shall be paid out of


(a) profits;
(b) profit for previous Financial Years Profit and
(c) amount PROVIDED by the Govt. for this purpose.

The Company has to provide for the depreciation for the Previous
Financial Years and Amount of Loss of the Previous Financial Years
OR Amount equal to the amount of depreciation whichever is LESS,
shall be SETOFF against the Previous Year profit BEFORE declaring
the Dividend.

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CONDITIONS
Depreciation (also ARREARS) to be provided;
Note: Central Govt. can allow companies to declare dividend without
providing for depreciation, if it is in public interest.
Transfer of Reserves as per Rules;
Board Recommendation;
Shareholder or BoD Declaration.

DECLARATION

WITHIN
WITHIN
5 days in a
30 days,
Separate
MAKE
Bank
payments
Account

WITHIN
7 days, OPEN PENALTY for NON-
Unpaid Dividend PAYMENT
Account Imprisonment
&
AFTER Rs.1000 per Day
7 &
years Simple Interest
@ 18%

INVESTOR EDUCATION
& PROTECTION FUND
U/S. 205C

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BUY BACK
UNDER
COMPANIES
ACT

S- 77B [>] 77A [>] Companies Act


Section 77A OVERRIDES all other provisions of Companies Act, as it
starts with the words “Notwithstanding anything contained in the
Act” but is SUBJECT to Section 77B of Companies Act. Though
Capital is Reduced under Buy Back, the provisions of Section 100 of
Companies Act, requiring Court Approval is NOT REQUIRED as
Section 77A overrides all other (Sec.100) provisions of Companies
Act. Thus, only sections 77A, 77AA & 77B to be complied with.

77B – PROHIBITION OF BUY BACK


Through Through Default in deposit Non-compliance of
Subsidiary Investment or loan or its S-159=Annual
(-ies) Company interest, dividend, Return; S-207=
(ies) redemption of Dividend; S-
preference / debt 211=Annual
Accounts

77A – BUY BACK

SOURCES
Free Reserves as per latest Securities Proceeds of shares /
audited Balance Sheet, free Premium specified securities, NOT
for distribution as Dividend Account of the same kind issued
earlier

77 – TRANSFER to Capital
Redemption Reserve (CRR)
Account – the “Nominal
Value of Shares
purchased”

OPPRESSION
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Rule in Foss v. Harbottle OR


Rule of Majority OR
Non-interference by Court

to avoid multiplicity of suits.


Convenience & Expediency,
This is a provision for
Exceptions to Foss case OR
individual member)
Rule of Minority OR
Company (Not, the
Interference by Courts OR
Proper Plaintiff is the
Protection of Minority Interest
Resolution;
Act ratified by Ordinary
Compliance of Law;

OPPRESSION & MISMANAGEMENT


Ultra Vires Act (beyond the powers);
Fraud on Minority;
Invasion of Individual Rights;
Articles amendment for the vested interest of few;
Spcl resol but ord resol+CG approval for vested interest of few

Eligibility u/s. 399 For Cos having Share


[only @ the time of filing Capital
petition to CLB – Entry] Lesser of
100 Members
1/10 (Toto Members)
1/10 (Issued Capital in
which calls are paid)

For Cos having Share


Capital
1/5 (Total number of
members in Register of
Members)
Central Government u/s. 400
CLB to give notice & Cent Govt u/s.401
May itself apply
consider views of CG
Authorise any person to
before passing the final move CLB

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