This article has been written by Mr. Aditya Jain, student of Maharishi University of Information Technology

Even though maximum companies have a share capital, but it is not an important element for the incorporation of a company. For example, it may well be a company that is limited by guarantee. Share capital of the company is generally separated into shares of equivalent amount.

The maximum share Capital is referred to as the company’s authorised capital of the company and has to be stated in the Memorandum of Association of the Company.  Authorised capital  is also denoted to as nominal capital and also the company is not permitted to raise capital which is more than its authorized capital. So as to surpass the authorized capital amount, the Memorandum of Association of the Company must be amended in accordance. Nevertheless, a company might issue an amount lesser than the authorized share capital and this is recognized as the issued share capital. Hence, the sum which is issued from the company’s authorized share capital is identified as the issued share capital of the company. Moreover, it is not essential that the whole issued share capital may be booked up and that is the reason why only that part which is subscribed to is identified as the subscribed share capital.

The portion of the subscribed capital which a company calls up for the purpose of payment is termed as the called up share capital of the company. The portion which is not called up for the payment is termed as uncalled capital. The uncalled capital can be converted into reserve share capital by means of passing the special resolution. Afterwards, the portion of called up capital which the shareholders really pay is termed as the paid up share capital, despite the fact that the unpaid portion is stated to as the unpaid capital.

Meaning of a share as per Companies Act 2013

The capital of a company contains many indivisible units and rarely includes of a single unit, in actual fact and these units are all of an exact amount. Hence, when an individual purchases such unit or more than a few units, he is buying a certain definite proportion of share capital in the company and in this instance, he turns out to be one of the countless shareholders of that company. The Companies Act 2013 has provided an enormously unclear and vague meaning to a share and describes a share as a  portion in the share capital of a company. Even though there are numerous ways of observing this, a share is not just an amount of money, but a strong portrayal of interest that a shareholder has in a company.

Salomon Vs. Salomon & Co. Ltd

It was held that, Mr. Salomon, the firm’s inventor, is secured from the private obligation to the creditors for the reason that the company is a distinct lawful entity from its members. Court supported the doctrine of corporate personhood which was established by the Companies Act of 1862.

Sri Gopal Jalan & Co. Vs. Calcutta Stock Exchange Association Ltd.: The Court had held that issuing a forfeited share again is not identical as a share allotment. The word allotment means  the acceptance of a share offer by the company.

Meaning of Call on Shares

A call on shares can be defined as the demand which is made by a company on the shareholders of the company to pay complete or a portion of the balance that is remaining outstanding on every share at any time throughout the life period of a company.  Normally, instalments are called as calls, excluding those which are payable as application and the allotment money.

RULES FOR MAKING CALLS:

1. Board of Directors is alone permitted to make a call.

2. The power to make a call cannot be delegated to any director or to any other officer of the company or to any committee of directors as per section 179 of the Companies Act, 2013.

3. In accordance with section 49 of the Companies Act 2013:

• A call on the shares which fall under the same class ought to be made on a uniform basis.
• Shares that are of the equal nominal value, on which dissimilar sums have been paid up, are not considered to fall under the same class of shares.

4. The Board’s resolution making the call on shares must lay down:

• the per share amount of call and
• the time permitted that is for its payment

5. The authority to make calls ought to be exercised in the overall interest and for the advantage of the company.

CALLS IN ADVANCE:

As per section 50 of the Companies Act 2013, the company might, if it is so authorised by its articles, receive from any of the members, the full or part of the sum remaining unpaid on any of the shares which is held by him, even though no part of such amount has been called up by the company. The sum that is so received or accepted is defined as a payment in advance of calls.

Consequences: When a company accepts payment in advance of calls, the consequences of such will be as follows:

1. No Voting rights: The shareholder will not be allowed voting rights with regard to the moneys so paid by him till such payment become at present payable.

2. Liability extinguished: The shareholder’s obligation to the company with regard to the call for which the sum is paid is extinguished.

3. Claim Interest:

a) The shareholder is allowed interest to the degree payable according to AOA on the amount of the call.

b) In case there are no profits, interest must be rewarded out of capital, for the reason that shareholder turns into the creditor of the company with respect to this amount.

c) In accordance with regulation 18 of Table-F of schedule-l, settled interest on calls in advance shall not surpass 12% p.a.

4. Not refundable: The sum received in advance of calls is non-refundable.

5. Priority: In the occasion of winding up, the shareholder positions after the creditors, but then again must be paid his amount along with interest, if there is any before other shareholders are compensated.

6. Duly exercised power: The authority to collect the payment in advance of calls should be exercised in the overall interest and for the advantage of the company (Syke’s case).

Provisions: Company to receive unpaid share capital, even though not called up (Section 50 of the companies Act, 2013)  

In accordance with section 50(1), as company might, if so, it is authorised by its articles of association, accept from any of the members, the full or a portion of the amount remaining unpaid on any of the shares held by him, even though no portion of that amount has yet been called up. Henceforth, the Companies Act 2013 identifies the right of the company to receive calls in advance on condition that it is authorized by its articles of association to do so.

Nevertheless, section 50(2) of the Companies Act 2013 further has provided that a member of the company that is limited by shares will not be allowed to any voting rights with regard to the sum paid by him in advance up until that sum has been called up.

References:

• https://blog.ipleaders.in/what-is-share/
• https://lawcorner.in/types-of-shares-and-share-capital-under-companies-act-2013/
• https://www.indiastudychannel.com/resources/109839-What-call-shares.aspx
• https://mastermindsindia.com/10.%20CALLS%20&%20FORFEITURE.pdf
• https://www.mca.gov.in/content/dam/mca/pdf/CompaniesAct2013.pdf
• The Companies Act 2013