Company Law Notes

1. Corporate Laws &
Secretarial Practices Notes
Professor:
DR. HASSAN JAWAD
SOOMRO

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Table of Contents
What is law?..................................................................................................................................................4
Classification of law .....................................................................................................................................4
Corporate Law ..............................................................................................................................................5
Types of Business Organization ...................................................................................................................6
3. Joint Stock Company.............................................................................................................................6
Types of company.........................................................................................................................................7
Public Limited Company ..........................................................................................................................7
Private limited company: ..........................................................................................................................8
Single member company: .........................................................................................................................8
Company limited by guarantee:................................................................................................................9
Company limited shares:...........................................................................................................................9
Unlimited company:..................................................................................................................................9
Public interest company:...........................................................................................................................9
Public sector company:.............................................................................................................................9
Listed company:........................................................................................................................................9
Holding company......................................................................................................................................9
Subsidiary company..................................................................................................................................9
Registration of a company ............................................................................................................................9
1. Reservation of a name.......................................................................................................................9
2. Conditions for Registrations .............................................................................................................9
3. Effects of Registration ......................................................................................................................9
INCORPORATION and PROVISIONS WITH RESPECT TO NAMES OF COMPANIES....................10
Rectification of name of company..........................................................................................................10
Registration of Memorandum. ....................................................................................................................11
Effect of Registration and Alteration of Memorandum ..............................................................................12
The effects of registration of memorandum:...........................................................................................12
Steps involve in Alteration of Memorandum..........................................................................................12
Alteration Generally................................................................................................................................12
Kinds of capital...........................................................................................................................................13
Authorized capital or Nominal capital....................................................................................................13
Issued capital...........................................................................................................................................13
Un issued capital.....................................................................................................................................13

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Subscribed capital...................................................................................................................................13
Called up capital .....................................................................................................................................14
Un called up capital ................................................................................................................................14
Paid up capital.........................................................................................................................................14
Reserve capital........................................................................................................................................14
Debenture and loan capital......................................................................................................................14
Circulating capital...................................................................................................................................14
Fixed capital............................................................................................................................................14
DEBENTURES...........................................................................................................................................14
Definition: ...............................................................................................................................................14
Explanation: ............................................................................................................................................14
CHARACTERISTICS OF A DEBENTURE: ........................................................................................14
KINDS OF DEBENTURES ...................................................................................................................15
A. On the basis of Security:.....................................................................................................................15
B. On the basis of Tenure:.......................................................................................................................15
C. On the basis of Convertibility:.............................................................................................................15
D. On the basis of Registration: ..............................................................................................................16
DIFFERENCE BETWEEN SHARES & DEBENTURES.....................................................................16
PROCEDURE FOR THE ISSUE OF DEBENTURES ..........................................................................16
TRANSFER & TRANSMISSION OF DEBENTURES.........................................................................16
Types of SHARES......................................................................................................................................16
Classes of Shares.....................................................................................................................................17
Preference Shares....................................................................................................................................17
Equity or Ordinary Share........................................................................................................................17
Types of Preference Shares.........................................................................................................................17
1. Cumulative Preference Shares ........................................................................................................17
2. Non-Cumulative Preference Shares................................................................................................17
3. Redeemable Preference Shares.......................................................................................................17
4. Irredeemable Preference Shares......................................................................................................17
5. Convertible Preference Shares........................................................................................................18
6. Non-Convertible Preference Shares................................................................................................18
Equity shares...............................................................................................................................................18
Difference between.....................................................................................................................................19

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Sweat equity shares.....................................................................................................................................19
Company secretary .....................................................................................................................................20
Secretary:................................................................................................................................................20
Role of Secretary.....................................................................................................................................20
characteristics of a good company secretary .............................................................................................21
Appointment of company secretary...........................................................................................................21

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What is law?
Law is a formal control mechanism. It provides a structure for dealing with and resolving disputes that
may arise, as well as providing some deterrent to those wishing to disrupt social order.
OR
Law means a set of rules or a system of rules of conduct designed and enforced by the state to control and
regulate the conduct of people.
Classification of law
There are various ways in which the law may be classified; the most important are as follows:
1. Public law. Public law is concerned with the relationship between the state and its citizens. This
comprises several specialist areas such as:
a. Constitutional law. Constitutional law is concerned with the workings of the British
constitution. It covers such matters as the position of the Crown, the composition and
Law
Public Law (relationship
between the state and its
citizen)
Constitutional Law
Administrative Law
Criminal Law
Private or Civil Law (Rights
and duties of individual
towards each other)
Contract
Tort
Property
Trust
Family

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procedures of Parliament, the functioning of central and local government, citizenship and the
civil liberties of individual citizens.
b. Administrative law. There has been a dramatic increase in the activities of government
during the last hundred years. Schemes have been introduced to help ensure a minimum
standard of living for everybody. Government agencies are involved, for example, in the
provision of a state retirement pension, income support and child benefit. A large number of
disputes arise from the administration of these schemes and a body of law, administrative
law, has developed to deal with the complaints of individuals against the decisions of the
administering agency.
c. Criminal law. Certain kinds of wrongdoing pose such a serious threat to the good order of
society that they are considered crimes against the whole community. The criminal law
makes such anti-social behavior an offence against the state and offenders are liable to
punishment. The state accepts responsibility for the detection, prosecution and punishment of
offenders.
2. Private /Civil Law. Private law is primarily concerned with the rights and duties of individuals
towards each other. The state’s involvement in this area of law is confined to providing a
civilized method of resolving the dispute that has arisen. Thus, the legal process is begun by the
aggrieved citizen and not by the state. Private law is also called civil law and is often contrasted
with criminal law.
Corporate Law
Corporate law may be defined as a branch of law governing the companies. It is a law relating to
companies formed and registered under an Act relating to the regulation of the working and conduct of
companies.
OR
Corporate law deals with various aspects relating to the affairs of companies. It spells out the rules
regulating the constitution and incorporation of companies.
 Rule regarding the issue of prospectus
 Conditions under which shares can be allotted
 Rules regarding the distribution of share capital
 The rights attached to various classes of shares
 Transfer of shares
 The alteration of share capital
 Duties of liabilities of promoters, directors, managers, chief executive and other officers of
company
 How make memorandum of association
 How to make article of association?

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Types of Business Organization
1. Sole proprietorship
2. Partnership
3. Company/ Joint Stock Company
1.Sole Trader Ship:
 Sole proprietorship means the business of one person.
 In this business only a single person invests his capital and efforts.
 He is solely responsible for all losses and enjoys the whole profit.
 This type of business is very easy to start.
 There are no legal formalities to start this type of business.
 A person can think it in morning and start it in evening. This type of business is suitable for small
scale activities.
2.Partnership
 When two or more person run a legal business for earning profit, it is called partnership.
 It is owned and managed by at least two (2) and maximum twenty (20) members.
 All the partners can take part in the conduct of business or any one of them can run the business
for all of them.
 The profit or loss is shared among the member according to agreed ratio.
 In absence of agreement profit or loss is shared equally among all the members. This type of
business is common and suitable for small and medium scale activities.
3. Joint Stock Company
A Company is an artificial person created by law, with a common seal and having perpetual (continuous)
life. It can sue and be sued in its own name.
Company is a voluntary association formed by peoples to carry on a certain business for profit and
contribute their capital in form of shares, company works with in its own name under a common seal.
CHARACTERISTICS.
• Voluntary association: As mentioned in the definition it’s a voluntary association of
peoples with their mutual consent.
• Separate legal entity: Company has a separate identity from its shareholders because its
treated as an artificial person. Company can make contract in its own name.
• Limited Liability: The liability of each shareholder is limited up to the value of shares
purchased by him/her. Company itself is liable for its debts.
• Transferability of shares: Shares can be easily transferred from one person to another.

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• Common seal: The law has provided the use seal with the name of company
• Perpetual existence: Company has a long life as compare other forms of business
organizations.
• Capacity to sue and be sued: Company has a right to sue against any person or company
and it can be sued by a person or company in case of breach of contract.
• Artificial person: According law company is treated as a person.
Types of company
1. On the basis of status
a. Private Company
i. Single Member Company
ii. Other than single member company
b. Public Company
i. Unlisted Company
ii. Listed Company
2. On basis of liability
a. Limited by shares
b. Company limited by guarantee
c. Unlimited Company
3. Other companies
a. Holding Company
b. Subsidiary Company
c. Association Not for profit Company
Public Limited Company
A Company which is a corporation whose ownership is distributed amongst general public shareholders.
Types of company
On the basis of
status
Private Company
Single Member
Company
Other than single
member company
Public Company
Unlisted Company
Listed Company
On basis of liability
Limited by shares
Company limited
by guarantee
Unlimited
Company
Other companies
Holding Company
Subsidiary
Company
Association Not for
profit Company

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Characteristics
 Minimum three persons are required to form a public limited company.
 No restriction on maximum number of members
 No restriction on the transferability of shares.
 It may issue a prospectus to invite general public to subscribe to its shares, debentures or deposits.
 A public company can commence business only when it receives the certificate to commence
business from the Registrar of Companies.
 A public company must hold a statutory meeting and file statutory report.
Private limited company:
A Company which is a corporation whose ownership is distributed amongst its members only.
Characteristics.
 Minimum two persons are required to form a private limited company
 Maximum number of members is restricted up to 50
 The right to transfer shares is restricted as per Articles of Association of a company.
 Invitation to public to subscribe capital is prohibited.
 A private company may commence business immediately after receiving the certificate of
incorporation.
 A private company need not hold a statutory meeting or file statutory report.
Single member company:
 In a single member company entire issued share capital is held or owned by one person. This sole
person is the sole beneficiary of the company.
Characteristics.
 Single ownership
 NO sharing profit and loss
 One man’s capital
 Unlimited liability
 Less legal formalities
 One-man control
 There is no legal distinction between the owner and business
 The subscriber to the memorandum shall nominate a person who in the event of death of the sole
member shall be responsible to-
o transfer the shares to the legal heirs of the deceased subject to succession to be
determined under the Islamic law of inheritance and in case of a non-Muslim member, as
per their respective law
o manage the affairs of the company as a trustee, till such time the title of shares is
transferred

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Company limited by guarantee:
Means a company having the liability of its members limited by memorandum to such amounts as
the members may respectively undertake to contribute to the assets of the company in the event of
its winding up. A company limited by guarantee is usually formed on a nonprofit bases.
Company limited shares:
Means a company having the liability of its members limited by the memorandum to the extent of
amount if any remaining unpaid on the shares respectively held by them.
Unlimited company:
Means company not having any limit on the liability of its members.
Public interest company:
Such as banks, insurance company, securities broker/ dealers.
Public sector company:
When government or any agency of government hold 51% shares of any company.
Listed company:
A company whose securities are listed on securities exchange.
Holding company
Company which is holds by another company.
Subsidiary company
Company is owned and controlled by another company, which is called parent or holding
company.
Registration of a company
1. Reservation of a name
 Promoters apply registrar to reserve name for 60 days
 Promoters appeal to commission within 30 days if in case of refusal
 Name reserved shall be cancelled if incorrect information is supplied
2. Conditions for Registrations
 Apply to registrar along with the following documents signed by subscriber:
o Memorandum of association (MOA)
o Articles of association (AOA)
o Declaration of compliance
o Address for correspondence
 If legal requirements are fulfilled, registrar issues certificate of incorporation
(Mentioning Name, date, status)
 If documents are defective/ do not comply law, registrar refuses registration
(subscribers can file revised documents),or (subscriber can file appeal to
commission within 30 days. No appeal against commission)
o Conclusive evidence
3. Effects of Registration
 Body corporate (with Name or status are registered.
 Separate legal status, perpetual succession and common seal.
 Subscriber become members with limited liability.

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 Person named in AOA become Directors
INCORPORATION and PROVISIONS WITH RESPECT TO NAMES OF
COMPANIES
Registration of name of a company is first and foremost thing for the incorporation of company.
There are some provision relating to registration for the name of a company which is to be followed:
1. Prohibition of certain names: - No company shall be registered by a name which contains such
word or expression, as may be notified by the commission or in the opinion of the registrar is-
a. Identical with or resemble or similar to the name of a company
b. Inappropriate
c. undesirable (unpleasant)
d. deceptive (misleading)
e. design to exploit or offend religious affected the people
f. any other ground as may be specified
2. Except with prior approval in writing of the commission, no company shall be registered by a
name which contains any word suggesting or calculated to suggest:
a. the patronage of any past or present Pakistani or foreign head of state.
b. any connection with the federal Government or a provincial Government or any
department or authority of Government.
c. any connection with any corporation set up by or under any federal or provincial law;
d. the patronage of or any connection with, any foreign Government or any international
organization.
3. A person may make an application for reservation of name of company by paying specified fee to
the registrar for a period not exceeding sixty days.
4. Where it is found that name was reserved under sub-section (4) by furnishing false or incorrect
information, such reservation shall be cancelled and in case the company has been incorporated, it
shall be directed to change its name. The person making application shall be liable to a penalty.
5. If the name applied for under sub-section (4) is refused by the registrar, the aggrieved person may
within thirty days of the order of refusal prefer an appeal to the commission.
6. An order of the commission under sub-section (6) shall be final and shall not be called in question
before any court or other authority.
Rectification of name of company
• If name in contravention of the provisions of section 10 name of company may change with
approval of registrar.
• If company fails to report compliance within specified time the registrar may enter may enter on
the new name for the company selected by him.
• A company may by special resolution and with approval of the registrar in writing, change its
name.
• For a period of ninety days from the date of issue of a certificate by the registrar under sub-
section (1) continue to mention its former name along with its new name
• The change of name shall not affect any rights and liabilities of company.

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Registration of Memorandum.
1. There shall be filed with the registrar an application on the specified form containing the
following information and documents for incorporation of a company namely:
a. a declaration on the specified form, by an authorized person named in the articles as a
director, of compliance with all or any of the requirements of companies Act 2017
b. memorandum of association of the proposed company signed by all subscribers, duly
witnessed and dated.
c. an address for correspondence till its registered office is established and notified.
2. Where the registrar is of the opinion that any document or information filed with him in
connection with the incorporation of the company contains any matter contrary to law or does not
comply with the requirements of law or is not complete owing to any defect, error or omission or
not properly authenticated, the registrar may either require the company to file revised document
or remove the defect or deficiencies within the specified period.
3. Where the applicant fails under sub-section 2 to remove the deficiencies conveyed within
specified period, the registrar may refuse registration of the company.
4. If the registrar is satisfied that all the requirements of companies Act 2017 have been complied or
full filled, he shall register the memorandum and other documents delivered to him.
5. On registration of the memorandum of a company, the registrar shall issue a certificate that the
company is incorporated.
6. 6. The certificate of incorporation shall state-
a. The name and registration number of the company
b. The date of its incorporation
c. Whether it is a private, public or a single member company
d. Whether it is limited or unlimited company
e. If it is limited whether it is limited by shares or limited by guarantee.
7. The certificate under sub-section (5) shall be signed by the registrar or authenticated by the
registrar official seal.
8. The certificate under sub-section (5) shall be conclusive evidence that the requirements of
companies Act 2017 for registration have been complied with and that company is duly
registered.
9. If the registration of the memorandum is refused, the subscribers of the memorandum or any one
of them authorized by them in writing, within thirty days of the order of refusal prefer an appeal
to the commission.
10. An order of the commission under sub-section (9) shall be final and shall not be called in question
before any court or other authority.

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Effect of Registration and Alteration of Memorandum
The effects of registration of memorandum:
a) The registrar certifies that the company is incorporated and that the company is limited by shares
or by limited by guarantee as the case may be.
b) From the date of incorporation, the subscribers become members of the company.
c) The company becomes a body corporate by the name contained in the memorandum.
d) All functions of an incorporated company can be exercised.
e) The company enjoys perpetual succession and has a common seal
f) The members have liability to contribute to the assets of the company in the event of the wound
up.
Steps involve in Alteration of Memorandum.
1. Preliminary discussion: Preliminary discussion at board meetings and with company’s advisers
to determine the best course to be adopted and the precise nature of the desired alteration.
2. Stock Exchange Requirements: Where company’s shares are desired to be quoted on a stock
exchange, ensure that the requirements of the exchange are fully and well understood and
complied with.
3. Consultation with Vested Interest: Prior consultation with some of the large shareholders,
creditors and debenture holders to ensure that the proposed change could be adopted without any
criticism.
4. Settlement with Registrar: Can any matter be settled before hand with registrar e.g. whether a
new name will meet with his approval.
5. Notice or Circular: Printing of notice of general meeting explanatory circular etc.
6. Routine of Meeting: Holding necessary meetings in routine with all stake holders, press filing
copies of special resolution.
7. Share certificate: Whether new share certificates are to be issued or old certificates are to be
called in for suitable alteration.
8. Resolution: After following all the necessary steps finally copy of printed resolution attached
with altered memorandum to be registered with the registrar.
Alteration Generally
A company can alter the conditions contained in its memorandum by fulfill the procedure and formalities
of companies Act 2017. conditions may be
1. Name of company
2. Situation of registered office of company
3. Objects of company
4. Capital of company
Alteration of Name: the name of company can be changed due to any reason which satisfy the authorities.

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 The change of name is not complete until it has been made upon the registrar and a new
certificate of incorporation issued. If a special resolution was not duly passed the registration of
new name should be vacated or canceled.
 For alteration company should submit copy of special resolution with application of alteration,
and obtain approval of registrar in writing.
Alteration of Registered office: When company wants to change the location of its registered office from
one place to another place like.
 From one city to another city
 From one province to another province or
 Capital city of Pakistan
 When jurisdiction of registrar office is changed the registrar of that area must be informed.
Alteration of Objects: A company may by special resolution alter its objectives like.
 to carry on its business more economically or more efficiently or
 to attain its main purpose by new or improved way or
 to enlarge or change the local area of its operator or
 to carry new business
 to amalgamate with any other company or body or persons
Alteration of Capital: A company can alter the capital of its memorandum.
 For the purpose of increasing capital
 For the purpose of reducing capital
 For the purpose of variation of shareholders rights
 For the purpose of company’s arrangements with creditors and members.
Kinds of capital
Authorized capital or Nominal capital
Authorize or nominal or registered capital which a company is authorized. Or register by its memorandum
of association to raise the finance by selling shares in public.
Issued capital
When company issue the part of register capital in terms of shares to the public for subscription.
Un issued capital
Remaining part of register capital which is not issued by company in the public.
Subscribed capital
The amount or number of shares which taken the public from issued Capital.

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Called up capital
It is the portion of subscribed capital, for instance if the price of per share is 100 rupees and company
only called or demand 40 rupees in that case
40 rupees is called up capital.
Un called up capital
Remaining part of called up capital as mentioned above company called only Rs 40 per share and
remaining Rs 60 is un called up capital.
Paid up capital
Paid up capital is part of called up capital which is actually received by
Company in cash from the shareholders, the remaining amount is arrears to the shareholders.
Reserve capital
Reserve capital is un called portion of subscribe capital and shareholders are liable to pay such amount.
Company passes special resolution that the company will not call it except. In case of emergency like
liquidation of company.
Debenture and loan capital
This is a kind of a debt financing when company needs finance to meet. Their financial needs to continue
day to day affairs.
Circulating capital
The capital which is used in converting raw material in to finished goods, Purchasing of raw material,
operating expenses and on day to day expenses of a company.
Fixed capital
The capital which is used for purchasing of fixed assets like land, building, Machinery.
DEBENTURES
Definition: A debenture is the written acknowledgement of a debt by a company, normally
containing provisions as to payment of interest and the terms of repayment of principal.
Explanation:
A debenture can be described as a debt instrument issued by a company to the public in order to raise
funds for medium or long term usage. It is just like a bank loan, with debt obligation and liability for
interest payment, but instead of borrowing from a bank, these are issued and traded in the capital
market. A debenture is a legal document that states the amount invested or lent, interest due, and the
repayment plan. The investor receives the principal and interest.
CHARACTERISTICS OF A DEBENTURE:
 It is in the form of a certificate, like a share certificate.

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 It is usually under the seal of the company but it is not necessary. A certificate signed by two
directors of a company.
 The company will pay back the principal amount with specified rate of interest at specific time.
 It is generally secured by a charge, fixed or floating on any part of the company’s property or
undertaking.
 The debentures carry no voting rights at any meeting of the company.
KINDS OF DEBENTURES
1. REGISTERED DEBENTURES.
2. BEARER DEBENTURES.
3. SECURED DEBENTURES.
4. UNSECURED DEBENTURES.
5. REDEEMABLE DEBENTURES.
6. PERPETUAL DEBENTURES.
7. CONVERTIBLE DEBENTURES.
8. NON-CONVERTIBLE DEBENTURES.
Debentures can be categorized on the following basis:
A. On the basis of Security:
Secured Debentures: Debentures that are issued against a security/collateral are called secured
debentures. In other words, a charge is made against the assets of the issuing company.
Unsecured Debentures: Debentures which are issued without any charge against the issuing company’s
assets are called unsecured debentures.
B. On the basis of Tenure:
Redeemable Debentures: Such debentures, which are due to be repaid at the end of a certain period,
either in a lump sum or in installments, either at a premium or at face value, during the lifetime of the
entity are called redeemable debentures.
Irredeemable/Perpetual Debentures: Such debentures are not redeemed or repaid during the lifetime
of the company. In the event of the winding-up of the company, such redemption may be possible.
C. On the basis of Convertibility:
Convertible Debentures: Debentures that can be converted into either equity capital or any other
security are called convertible debentures. This can be done at the will of the holders of the company.
Non- Convertible Debentures: Debentures which cannot be converted into equity shares or any other
form of security are called non-convertible debentures.

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D. On the basis of Registration:
Registered Debentures: Debentures against which all information about their holders, like names,
addresses, etc. are kept in a special register at the company’s head office are called registered
debentures. Such debentures cannot be transferred just by delivery, but require a transfer deed.
Bearer Debentures: These debentures are transferred via simple delivery and no special record is kept
in the company register for such documents.
DIFFERENCE BETWEEN SHARES & DEBENTURES
1. STATUS: A shareholder is the joint owner of the company but a debenture holder is only a
creditor of the company.
2. VOTING RIGHTS: A shareholder has a voting rights whereas a debenture holder has no such
rights.
3. INCOME: Interest on the debentures is payable whether there are profits or not. But dividend on
shares is to be paid only when the company has earned profits.
4. DISCOUNT ON ISSUE: Debentures can be issued at a discount whereas shares cannot be issued
at discount.
PROCEDURE FOR THE ISSUE OF DEBENTURES
 Debentures are issued in accordance with the provisions of the articles, usually by a resolution of
the Board of directors.
 Once a decision is taken by the Board of directors to issue debentures the next step will be to
draft prospectus relating to the issue.
 The provisions of relating to prospectus apply to the issue of debentures as they apply to an issue
of share capital.
 Particulars of any commission, discount or allowance paid either directly or indirectly to any
person for his subscribing or procuring subscription for debentures of the company must be filed
with the registrar.
 Debentures are often issued in a series with whereby all debentures of a particular series, though
issued at different and varying times are to rank together, as regards the security created by them.
TRANSFER & TRANSMISSION OF DEBENTURES
 Bearer debentures are transferable by simple delivery.
 Registered debentures are transferable in the same manner as the shares of a company are
transferred.
 The debentures shall be a movable property, transferable in a manner provided by the articles of
the company.
Types of SHARES
What is a share?

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A share is defined as, “a share in the share capital of the company”
 Share capital of the company is collected by issue of shares.
 Share is one of the units into which total capital is divided.
Classes of Shares
1. Preference Shares
2. Equity or Ordinary Share
Preference Shares
a. It offers a fixed rate of dividend.
b. Right to get capital on winding up, before anything is paid to equity shareholders.
Equity or Ordinary Share
a. These shares have voting rights.
b. It doesn’t offer a fixed rate of return.
c. They are not entitled to get capital in case of company’s bankruptcy, before paying to
preference shareholders.
Types of Preference Shares
1. Cumulative Preference Shares
2. Non-Cumulative Preference Shares
3. Redeemable Preference Shares
4. Irredeemable Preference Shares
5. Convertible Preference Shares
6. Non-Convertible Preference Shares
1. Cumulative Preference Shares
 Fixed rate of dividend is guaranteed.
 At the time of inadequate profit, they will not loss anything.
 Not paid dividends will be paid in subsequent years.
2. Non-Cumulative Preference Shares
 Fixed rate of dividend is guaranteed.
 At the time of inadequate profit, they will not get anything.
3. Redeemable Preference Shares
 Allows the issuer to buy back shares after a fixed period of time or earlier at a certain
price and retire it.
4. Irredeemable Preference Shares
 It does not carry the arrangement for redemption.
 Shares are repayable only at winding up.

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5. Convertible Preference Shares
 It can be converted into Equity shares within a certain period.
6. Non-Convertible Preference Shares
 It cannot be converted into Equity shares.
Equity shares
A share that gives the person who owns it the right to receive part of a company's profits and to vote at
shareholder meetings.
 The whole of the profit of a company is entitled to these shareholders, after paying a
fixed dividend to preference shareholders.
 They don’t get a fixed rate of dividend.
 They will get back their capital only after paying preference shareholders.

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Difference between
Sweat equity shares
 It is issued to employees or directors of a company at discounted rate.
 Issued for consideration other than cash.
It must follow these conditions;
1. Authorised by special resolution in general meeting.
2. Number, price, consideration (if any) and classes should be specified in the resolution.
3. The company must complete one year.
Nominal value is lower.
Dividend varies according
to profit.
No right for arrears of
dividend.
No priority in dividend
and repayment of capital.
Cannot be redeemed.
There is more risk.
Wider voting right.
Control over
management.
Highly speculative.
Ready to take risk and to
get greater dividend
prefer this.
 Nominal value is higher.
 Rate dividend is fixed.
 Cumulative preference
shares get arrears.
 Priority in dividend and
repayment of capital.
 Can be redeemed.
 The risk is lower.
 Limited voting right.
 No control over
management.
 Less speculative.
 Not ready to take risk
and expect steady
income prefer this.
Equity Shares Preference Shares

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4. Equity shares of those company must be listed in recognised stock exchange.
Company secretary
Secretary: Confidential officer or a person, therefore, overseeing business confidentially, usually
for a powerful individual.
Role of Secretary
 Managing all Board and committee meeting logistics
 Coordinating, preparing and distributing Board/committee
 Pre-read materials, meeting agendas, notifications, and
 Meeting minutes for the Board of directors and committees. §
 Attending Board and committee meetings — recording minutes, highlighting Board and
committee decisions and
 Information items. § Reporting outstanding agenda items and ensuring information is provided
to the Board/committee
 Members in a timely manner. § Preparing all correspondence for the Board/committees
including responses to enquiries
 or complaints directed to the Board/committees.
 Maintaining key corporate documents and records like
 statutory books. § Supporting the Chairman in performing
 his/her role, including the provision of appropriate briefing
 material to the shareholders.
 One of the most significant tasks that a company secretary
 undertakes is preparing for and conducting an AGM
 successfully. It is at the heart of a company secretary‘s role to
 ensure that AGM is conducted in a manner so that
 shareholders actively participate in the meeting and provide
 opportunity for the management and the shareholders to get

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 the most out of the meeting at the same time ensuring that full compliance with relevant
provisions of the Listing
 Regulations, Companies Act and all other applicable
 laws, regulatory requirements and according to the
 company’s Articles.
characteristics of a good company secretary
The essential characteristics of a good company secretary should comprise of the following:
 Honesty/ truthfulness
 Confidence and an ability to express concerns freely
 Problem solving ability
 A team player
 Legal knowledge and
 Experience
Appointment of company secretary
 A company secretary is usually appointed by a resolution of the BOD and a service agreement is
executed by the company and secretary specifying
 The terms and conditions of his appointment, remuneration, retirement etc.
Qualification.
 The secretary should be highly qualified in the field of accounting, auditing
 And company law he should have good knowledge as under
 Sound general education
 Sound practical knowledge of office organization and business methods
 Possess knowledge of book keeping, accountancy, taxation law etc.
 Be conversant with business or commercial law
 Know law relating to conduct and procedure of meetings
 Should have command over English language
 Possess a good personality
 Be a well-read man

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CERTIFICATE OF SHARES AND OTHER SECURITIES
Limitation of time for issue of certificates:
1. Every company shall issue certificates of shares or other securities within thirty days after the
allotment of any of its shares or other securities.
2. Any violation of this section shall be an offence liable to a penalty of level 1 on the standard
scale.
Issuance of shares in book-entry form:
1. Every existing company shall be required to replace its physical shares with book-entry form
within a period not exceeding four years from the commencement of this Act.
2. After the commencement of this Act from a date notified by the Commission, a company having
share capital, shall have shares in book-entry form only.
Issue of duplicate certificates
1. A duplicate of a certificate of shares, or other securities, shall be issued by the company within
thirty days from the date of application if the original:
a. is proved to have been lost or destroyed, or
b. having been defaced or mutilated or torn is surrendered to the company.
2. If the company for any reasonable cause is unable to issue duplicate certificate, it shall notify
this fact, along with the reasons within twenty days from the date of the application, to the
applicant.
TRANSFER OF SHARES AND OTHER SECURITIES:
An application for registration of transfer of shares and other transferable securities shall be duly
stamped and executed by the transferor and the transferee may be made to the company within fifteen
days after the application for the registration of the transfer of any such securities and:
 (a) ensure delivery of the certificates to the transferee at his registered address; and
 (b) enter in its register of members the name of the transferee
Board not to refuse transfer of shares:
The board shall not refuse to transfer any shares or securities unless the transfer deed is, for any reason,
defective or invalid.
Restriction on transfer of shares by the members of a
private company:
1. A private company may transfer or sell its shares in accordance with its articles of association
and agreement among the shareholders.
2. A member of a private company desirous of selling any shares held by him, shall intimate to the
board of his intention through a notice.
3. On receipt of such notice, the board shall, within a period of ten days, offer those shares for sale
to the members in proportion to their existing shareholding.
a. This transfer is only valid when

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i. The letter of offer for sale specifying the number of shares to which the member
is entitled
ii. Price per share and
iii. Specifying the time limit
4. if not accepted, be deemed as declined, shall be dispatched to the members through registered
post or courier.
Notice of refusal to transfer:
If a company refuses to register a transfer of any shares or other securities, the company shall, within
fifteen days after the date on which the instrument of transfer was lodged with the company, send to
the transferee notice of the refusal indicating reasons for such refusal.
Transfer to successor-in-interest
 The right to protect the interest of the legal heirs in the shares of the deceased in the event of
his death.
 The shares or other securities of a deceased member shall be transferred on application duly
supported by succession certificate or by lawful award.
 The person nominated under this section shall, after the death of the member, be deemed as a
member of company till the shares are transferred to the legal heirs.
 If the deceased was a director of the company, not being a listed company, the nominee shall
also act as director of the company to protect the interest of the legal heirs.
 The person to be nominated under this section shall not be a person other than the relatives of
the member, namely, a spouse, father, mother, brother, sister and son or daughter.
Appeal against refusal for registration of transfer:
 The transferor or transferee, or the person who gives intimation of the transmission by
operation of law may appeal to the Commission within a period of sixty days of the date of
refusal.
 The Commission shall, provide opportunity of hearing to the parties concerned and may, by an
order in writing, direct that the transfer or transmission should be registered by the company
and the company shall give effect to the decision within fifteen days of the receipt of the order.