a) What is a stock?
Stock is an aggregate of fully paid-up shares. Thus, stock is simply a set of shares put together in a bundle. When shares are fully paid-up, they may be converted into stock.
b) What is a share?
Section 2(84) of the Companies Act 2013, defines “Shares” as, “Share” means a share in the share capital of a company including stocks
c) What is minimum subscription?
According to Section 39(1) of the Companies Act, 2013, no company can proceed to allot shares to the public until the minimum subscription has been subscribed, and the sum payable on applications for it has been received by the company by cheque or other instrument. If the company does not receive the minimum subscription, the entire subscription will be refunded to the applicants.
d) What is meant by allotment of shares?
When a company issue a prospectus inviting the public to subscribe for the shares of a company, it is merely an invitation rather than an offer. An application for shares is an offer by the prospective shareholders to take the shares of the company. Such offers are made on application forms supplied by the company. When an application is accepted, it is called allotment. Allotment of share is the acceptance by the company of the offer made by the applicant.
In Sri Gopal Jalan & Co. v. Calcutta Stock Exchange Association Ltd., AIR 1964 SC 250 case, allotment of shares was explained by the Supreme Court as “the appropriation, out of the previously unappropriated capital of the company, of a certain number of shares to a person. It is only after allotment that shares come into existence. Reissue of forfeited shares is not an allotment’.
e) What is share warrant?
A Share Warrant is a document issued by the company under its common seal, stating that its bearer is entitled to the shares or stock specified therein. Share warrants are negotiable instruments. They are transferable by mere delivery without registration of transfer.
f) Which companies can issue share warrant?
Only public limited companies have the right to issue share warrant.
g) What is a blank transfer?
when transferor signs the transfer form without filling 1) in the name of transferee and 2) date of execution and 3) hands over such transfer deed along with the share certificate to the transferee to let him deal with those shares, it is called as blank transfer.
h) What is transmission of shares?
Transmission of securities has not been defined by the Companies Act. Transmission of securities means where a person acquires an interest in property by operation of law, such as by right of inheritance or by reason of the insolvency or lunacy of the holder of securities or by purchase in a Court-sale.
i) What do you mean by issue of shares at premium?
Shares are generally issued at par or their nominal value, but sometimes the shares are issued at an amount that is higher than the par value or the nominal value, such instance of issuing shares is known as shares issued at premium.
j) What is meant by issue of shares at discount?
When shares are issued at a price lower than the face value (Nominal value), they are said to be issued at discount.
k) What is lien on shares?
Lien is the right of the lender to retain some property of the borrower until his debt is paid. Lien on shares under the (English) Act is an equitable charge upon the shares and gives rise to the same rights as if the shares had been expressly charged by the member in favour of the company. A lien on shares is a security and makes the company a secured creditor in the bankruptcy of a shareholder. On the exercise of the right of lien, the member ceases to be a member of the company.
l) What is meant by forfeiture of shares?
Forfeiture of shares is referred to as the situation when the allotted shares are cancelled by the issuing company due to non-payment of the subscription amount as requested by the issuing company from the shareholder. In the event of forfeiture of shares, the shareholders loses the rights and interests of being a shareholder and ceases to be a member of the organisation.
n) When shares can be forfeited?
Forfeiture of shares is referred to as the situation when the allotted shares are cancelled by the issuing company due to non-payment of the subscription amount as requested by the issuing company from the shareholder.
o) What is meant by surrender of shares?
Surrender of shares means voluntary return of shares by a member to the company.
p) Give any two purposes for which the Security Premium amount can be utilized by the company.
According to Section 52 of the Act, securities premium can be used for the following purposes:
- Issuing fully paidup bonus shares to existing shareholders.
- Writing off expense of issue of shares and debentures, such as discount given on previous issue of shares.
- Writing off preliminary expenses
- For funding a scheme or buy-back of securities which is conducted in compliance with the provisions of Section 68 of the Companies Act.
- For ensuring the availability of the premium on the redemption of redeemable debentures or preference share capital of the company.
q) What are the duties of a shareholders?
The duties of shareholders are as follows:
- Duty to be in touch with other members of the company so that they can see the work progress of the company.
- Shareholders are not entitled to anything except for their ownership interest in the company.
- Shareholders should consult on the matters of finance and other topics.
- Shareholders are also not responsible for the company’s debt. However, if a company is liquidated, creditors are first in line to have their debts paid, then bondholders, and then common shareholders. However, an exemption to this is that a shareholder is liable to pay the company for any amount unpaid on their shares.
- Shareholders should participate in the general body meetings so that they can see and also can advise on the matters which they feel is not going well.
r) What is the effect of issue of share certificate?
- Estoppel as to Title: According to Section 46(1) of the Act, a certificate under the common seal of the company is prima facie evidence of the title of the person to the shares specified therein. In other words, the company is estopped from denying his title to the shares.
- Estoppel as to Payment: If the certificate states that on each of the shares full amount has been paid, the company is estopped as against a bona fide purchaser of the shares, from alleging that they are not fully paid.
s) Distinguish between share and stock.
| Shares | Stocks |
| “Share” means a share in the share capital of a company including stocks. | A Stock is an aggregate of fully paid-up shares. |
| A company can directly issue shares. | A company cannot directly issue stock. It must first issue shares and then convert the shares into stock. |
| In case of shares a share certificate is issued. | In case of stocks a stock certificate is issued. |
| Shares are divided into equal parts | Stocks need not be divided into equal parts. |
| The value of two different shares of a company can be equal to each other. | The value of two different stocks of a company may or may not be equal to each other. |
| There is a nominal value that is associated with shares. | There is no nominal value that is associated with stocks. |
| Shares have distinctive numbers | Stocks need not be numbered |
| The shares of a company are either fully paid up or partially paid up. | The stocks of a company (or a group of companies) are always fully paid up. |
| Shares have a narrower scope when compared to stocks. | Stocks have a wider scope when compared to shares. |