Section 561 obliges a company to offer new shares first of all to its existing shareholders in the same proportions they already hold shares. In other words, it upholds shareholders’ right to be protected from dilution. If they are willing to pay the price asked for the new shares, they can have them.
Any company may make an ‘off-market purchase’ of its shares by contract with one or more particular shareholders. The contract must be approved by an ordinary resolution in general meeting. Under the original legislation a special resolution was required, but this was amended by the 2013 Regulations.
Provisions and procedures under the companies act for allotment and issuance of shares/securities: Issuing of the prospectus: to raise money for the company is the first step and a prospectus is basically an invitation to the public to purchase the shares of the company.
No company shall purchase its own shares or other specified securities unless such buy-back is authorized by its articles and a special resolution has been passed in general meeting of the company authorizing the buy-back.
Do we need shareholders’ approval to issue private company shares? Many SME and start-up companies have the default model articles of association and only one class of ordinary shares. If so, the directors can issue new shares without requiring prior authority from the shareholders.
The most common question people have about company shares is if there is a limit to how many shares they can purchase. Because a company cannot offer unlimited shares, there will be some limit to how many shares are available to buy. When a company makes an initial public offering, it will issue a set number of shares.
Buy-back should not be more than 25% of the total paid up capital and free reserves of the company. 4. Buy-back of equity shares in any financial year must not exceed 25% of its paid up equity capital.
There is no minimum number of shares that must be authorized in the articles of incorporation. One or more shares may be authorized. However, the corporation may not sell more shares than it is authorized to issue and it must receive consideration in exchange for its shares.
After a share buyback, shareholders will own a bigger portion of the company, and therefore a bigger portion of its earnings. In theory, a company will pursue stock buybacks because they offer the best potential return for shareholders – more than they would get from doing any of the other three options listed above.
The articles may contain such an authority but if they do not or if the authority has expired then an ordinary resolution of shareholders is required to allow the allotment.
The general rules regarding allotment of shares are as foIlows: i) The allotment must be made by proper authority: It is the duty of the Board of’ directors to aIlot the shares. However, the Board may delegate this authority to some other person or persons as per the provisions of the articles of association.
What is the procedure & consequence. 1) You can not allot share before allotment/subscription money received. 2) The Board will allot shares on the credit of allotment money in its bank account. You will not allot on the basis of cheque received.