What are the provisions of Law about Share Capital?[7/8 Marks]

Share Capital

Disclosures relating to share capital (to be given in the notes) are more detailed than existing ones. The following additions/ modifications are particularly important :

1. Different classes of preference share capital to be treated separately. If a company has issued 10% convertible preference shares and 12.5% Redeemable preference shares, these should be disclosed separately.
2. For each class of shares following disclosure should be made :
1. the number and amount of shares authorized.
2. the number of shares issued, subscribed and fully paid and subscribed but not fully paid.
3. par value per share.
4. a reconciliation of number of shares outstanding at the beginning and at the end of the reporting period.
3. For each class of shares, a reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period is required. This seems to be a response to the malpractice of issuing a larger number of shares than represented by the amount of paid up capital as disclosed in the balance sheet.
4. The rights, preferences and restrictions attaching to each class of shares, including restrictions on the distribution of dividends and the repayment of capital.
5. Disclosure of shares in respect of each class in the company held by its holding company or its ultimate holding company including shares held by subsidiaries or associates of the holding company or the ultimate holding company in aggregate.
• It seems that the requirement is aimed at bringing clarity regarding the identity of ultimate owners of the company.
• It may be noted that while shares held by subsidiaries and associates of the holding company or ultimate holding company are covered, shares held by a joint venture of the holding company or of the ultimate holding company are not required to be included.
• The existing Schedule requires disclosure of only the number of shares held by the holding company as well as by the ultimate holding company and its subsidiaries.
6. Disclosure of shares in the company held by each shareholder holding more than 5 percent shares, specifying the number of shares held. The objective again seems to be to provide clarity regarding the owners of the company.
7. Shares reserved for issue under options and contracts / commitments for the sale of shares/disinvestment, including the terms and amounts. The existing Schedule VI requires disclosure of only particulars of any option on un-issued share capital.
8. Disclosure of the following for the period of five years immediately preceding the date of the balance sheet :
• Aggregate number and class of shares allotted as fully paid up pursuant to contracts without payment being received in cash
• Aggregate number and class of shares allotted as fully paid up by way of bonus shares
• Aggregate number and class of shares bought back.
• The existing Schedule VI too requires disclosures mentioned in the first two bullet points above but does not limit the period of such disclosure to a period of 5 years. Further, it requires the source from which bonus shares have been issued to be specified; this requirement is not carried forward in the revised Schedule.
9. Terms of any securities issued that are convertible into equity/preference shares along with the earliest date of conversion in descending order starting from the farthest such date.
10. Forfeited shares should be disclosed.