Summary of Share Capital And Debentures | English

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In this video, a lawmaker explains the rules and regulations governing share capital and debentures in India. He discusses the different types of share capital, preference shares, and how they are redeemable. He also explains the circumstances in which shareholders have voting rights. Lastly, he discusses the rules governing share buybacks by companies in India.

00:00:00 This 1-paragraph summary covers the important points of a lecture on share capital and debentures, including the classification of share capital, authorized share capital, and issue price.
00:05:00 The video offers a brief overview of how shares work and how a shareholder's liability and rights change based on the company's status. For example, if a company is in a going concern situation, the shareholder has the right to demand a dividend, but if the company is winding up, the shareholder has the right to participate in the assets.
00:10:00 This video discusses the different types of share capital, discusses preference shares, and explains how they work. A preference share carries a preferential right in respect of dividend payment, and must meet two conditions - it must be a cumulative preferential and it must be fully convertible.
00:15:00 This video explains how preference shares work and how they are redeemable. A company may issue preference shares if it has no existing defaults or if it is engaged in certain types of projects. The shares are redeemable after 20 years, but only on a proportionate basis.
00:20:00 The lawmaker explains that a company can redeem preferences either from profits or through a fresh issue, but only if it is authorized by the articles of the company. A company can also issue equity shares with differential voting rights only if it passes an ordinary resolution through a general meeting.
00:25:00 The lawmaker over here has said that a company should not be penalized by the court or tribunal during the last three years for any offense either towards the RBI at or towards the SEBI Act or towards the Securities Contract Act or towards the Foreign Exchange Management Act. In addition, a company should not issue a new equity share with differential voting rights before it has issued an equity share with normal voting rights.
00:30:00 This video discusses the different circumstances in which a shareholder has voting rights. In case of a resolution affecting the rights of preference shareholders, they will have the right to vote, as well as in case the company is going to wind up or in case of repayment or reduction of equity share capital. If the company has not paid dividend to preference shareholders in two years or more, every preference shareholder will have a right to vote for all resolutions.
00:35:00 Section 52 deals with the issue of shares at a premium. It is the board of directors of the company who decides the rate of premium, and the premium cannot be treated as a profit. If you start treating it as a profit, then it should be made available for distribution as dividend. In addition, section 53 allows a company to issue shares at a discount to creditors in case of a debt restructuring scheme, and section 66 deals with the reduction of share capital.
00:40:00 The next section of law that is being discussed is about sweat equity shares. These are shares that are given to employees or directors for a consideration other than cash. The employee or director must have knowledge or rights in intellectual property that is required in order to issue these shares. If the company is a listed company, the provisions of the SEBI should also be followed. If the company is an unlisted company, the rules prescribed by central government should be followed.
00:45:00 This video explains how shareholders can purchase new shares of a company, and how the company can issue bonus shares in the event of a revaluation of assets.
00:50:00 The video discusses the effects of a company issuing bonus shares, and the conditions that must be met in order to do so. If the company has passed a board resolution authorizing the buyback, it can buy back up to 10 percent of its paid up equity capital plus free reserves. If the company wants to buy back more than 10 percent of its paid up equity capital in free resources, it will have to pass a special resolution. The company can buy back through its free resource, its securities premium account, or the proceeds of an earlier issue of shares or securities. After the buyback, the debt equity ratio cannot exceed 2 to 1. If the central government notifies a higher debt equity ratio for your class of companies, the company must follow that higher ratio.
00:55:00 This video discusses the rules governing share buybacks by companies in India. The company must disclose whether it is planning to buy back more than 10% of its shares, and if so, must pass a special resolution before doing so. If the buyback is less than 25% of the company's outstanding shares, the company must instead follow the rules provided by the Central government, which may include calling a general meeting. If the buyback is more than 10% of the company's outstanding shares, the company must first offer shares proportionately to its existing shareholders, then offer shares in the open market, or offer shares to employees under employee share schemes. The company must also maintain a register of shares bought back, and must notify the regulator, Securities and Exchange Board of India (SEBI), of the completion of the buyback. The buyback must be completed within one year from the date of passing a special resolution or the board resolution, whichever is earlier. After the buyback is completed, the company must observe a cooling period of at least six months before issuing new securities.

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The video explains the revision of provisions related to share capital and debentures. If a company fails to redeem debentures or pay interest, the debenture holders may file an application to the tribunal. If the directions of the tribunal have not been followed, then the company may be penalized.