Shares, Share Capital and Debentures
Shares, Share Capital and Debentures
This domain tests share types, capital structure, issue routes, and debenture rules under the Companies Act, 2013.
Core rules
- Share capital: authorised, issued, subscribed, paid-up, called-up and uncalled. Equity shares may carry differential voting rights; preference shares carry preferential dividend and repayment but usually no voting on ordinary resolutions.
- Issue routes: rights issue under Section 62 (offer to existing shareholders), bonus issue under Section 63 (from free reserves, securities premium or capital redemption reserve, not revaluation reserve), private placement under Section 42 (maximum 200 persons in a financial year, excluding QIBs and employees), ESOP and sweat equity.
- Debentures are debt instruments; debenture holders are creditors, not members, and have no voting rights. Secured, unsecured, convertible and non-convertible debentures are common.
Worked example
A company has paid-up capital ₹80 lakh and free reserves ₹20 lakh. It proposes a bonus issue of ₹25 lakh. It can use securities premium and free reserves but not revaluation reserve; the bonus must be authorised by AOA and approved by shareholders.
Traps
Private placement limit is not 50 or 500; it is 200 persons per financial year. Bonus issue cannot be made from revaluation reserve. Share premium use is restricted by Section 52. Debenture holders do not become members by holding debentures.