A person is deemed to have an interest in a share or debenture

(i) if he has any right to acquire or dispose of the share or debenture or any interest therein or to vote in respect thereof;

(ii) if his consent is necessary for the exercise of any of the rights of other persons interested therein; or

(iii) if other persons interested therein can be required or are accustomed to exercise their rights in accordance with his directions or instructions.

Any person, who is required to give information fails to give information knowingly or recklessly makes any statement which is materially false, is liable to punishment with imprisonment upto 6 months or with fine upto Rs. 50,000 or with both.

The Companies (Amendment) Act, 1988 has without prejudice to the existing powers of the Central Government under Section 248, as stated above, has also enjoined the Company Law Board to call for information in respect of the ownership of shares and debentures.

. Opening and Closin Subscription List [Sec. 72J

Date of opening of subscription list nUlst be specified in the prospectus and the collecting banker

accepts the application for subscription of shares from the date of

opening of the isue. .

The Company Act does not spcci(v the period for which the subscription list must be kept open. Issue should be kept open as per SEBI guidelines, for a

minimum of three working days and for a maximum of 10 working days [21 days in the case of infrastmcture projects]. Last day and the earliest day of

closure must be specified in the prospectus.

However, no allotment of shares can be made until the beginning of the fifth day from the date of issue of prospectus or such later date, if any, as may be

specified in the prospects. By virtue of this restriction, a company cannot allo shares immediately after the.issue of prospectus.

6. Shares and Debentures to be dealt in on Stock Exchange. Section 73, as amended by the Companics (Amendment) Act, 1988, requircs that every

company, intending to offcr shares or debentures to the public for subscription by the issue of a prospectus shall, before such issue, make an application

to onc or motc recognised stock exchanges for permission for the shares or debentures intending 10 be so offered to be dcalt on the stock cxchange or

each sue II stock exchange. The name of the stock exchange or, as the case may be, of each of the stock exchanges is to be stated in the prospectus.

TYPES OF SHARES

The shares which can be issued by a company, are of two types,namely:

1. Preference shares, and 2. Equity or ordinary shares.

Any other type of shares cannot be issued by a public company or a

private company which is a subsidiary of a public company [Sec. 86].

However, a private company which is not a subsidiary of a public company, can issue other kinds of shares or shares with disproportionate rights -[Sec.

90 (2)].

1. Preference Shares. Preference shares are those which carry the following preferential rights over other classes of shares: (a) a preferential right in

respect of a fixed dividend, (b) a preferential right as o repayment of capital in the case of winding up of the company in priority to other classes of shares

(Section 85).

The sum-total ofthe preference shares is the ‘preference share capital’

of the company.

Kinds of Preference Shares. The preference shares may be of the

following kinds:

1. Cumulative and non-cumulative preference shares.

2. Participating and non-participating preference shares.

3. Convertible and non-convertible preference shares.

4. Redeemable and irredeemable preference shares.

1. Cumulati’e and Non-cumulative Preference Shares. The ‘cumulative preference shares’ are those which are assured of the dividends every year even

if there are no profits in a particular year. If in a particular year there are no profits to pay the dividends, the unpaid dividend of such prefetence shares is

treated as arrear and is carried forward to the subsequent years. TIllIS, the unpaid dividend goes on accumulating and is paid when there are sufficient

profits in the subsequent years. It may be noted that when there are profits in a ye.1r then the arrear of dividend are paid to the preference shareholders

before paying anything to the other (i.e. equity) shareholders. Ifthe company goes into liquidation, the arears of any dividends are not payable unless either

it provides so or such dividends have been declared. .

All preference shares are always presumed to be cumulative unless the contrary is stated in the Articles or the terms of issue.

Memonmdum of a company must be in one of the Forms

Form of Memorandum. The Memonmdum of a company must be in one of the Forms given in Schedule I of the Act. The Fonns are applicable
to different types of companies. The prescribed Forms are as follows:
Table B . A company limited by shares.
Table C . A company limited by guarantee and not having a sharecapita I.
Table D . A company limited by guarantee and having a sharecapital.
Table E . A company having unlimited liability.Contents or Clauses of Memorandum. The memorandum of a
company limited by shares must contain the following clauses:
I. Name clause. 2. Registered office clause, 3. Objects clause, 4.
Liability clause. 5. Capital clause, 6. Association or subscription clause.
1. Name Clause. This clause of 'memorandum of association' contains the name of the proposed company. The company being a legal person.
must have a name to establish its identity. As a matter of fact, the name is the symbol of personal existence of the company. A company may choose any
suitable name it likes. Howcver, the following rules must be observed while selecting the name of a company:
I. A company cannot adopt a name which is undesirable in the opinion of the Central Government. A name which is too identical with or to closely
resembles the name of an existing company may be deemed to be undesirable by the Central Government (Section 20). If a company, inadvertently, is
registered by an identical name, the court will grant an injunction to use that name (Erring Vs. Buttercup Margarine Co. Ltd.)
2. The name of a company should not contain those words and pictures the use which has been prohibited under the Emblems and Names (Prevention of

Improper Use) Act, 1950, e.g., U.N.O., W.H.O, pictorial representation. of Mahatma Gandhi, Prime Minister of India, etc.
3. The public company with limited liability must add the word 'Limited' at the end of its name, and the private (;company the word 'Private Ltd.'. The

Central

An individual, a firm, an association of person or a company

An individual, a firm, an association of person or a company may fun chon as a promoter. Whether a person is a promoter or not very much depends on
the facts in each particular case. Only one who has a desire to form a company and is prepared to take necessary steps to bring a company into
existence is a promoter.Legal Position of a Promoter, The legal position of a promoter is somewhat peculiar. He is not a taste for the coin any because

there is no company yet in existence. For the same reason, he cannot be the company's agent either.
As per the spirit of the provisions of the Companies Act with regard to promoters and some judicial opinions, it may be clearly inferred that a promoter
stands in a fiduciary position or relationship to the company. Fiduciary position means that he holds a position of good faith (complete confidence) and
trust. In this position, he is required to act in the following manner:
t. Transfer of Benefits. A promoter, if he has secured any benefits from the negotiationscontracts entered into by him for the company" must pass on all
such benefits to the company.
2. Not to make any Profit at the Expense of the Company. A promoter must not If ake any profit directly or indirectly at the expense of or by using the
name of the company. If any secret profit is made in violation of this mle, the company may, on discovering it, compel him to account for and surrender
such profit.
3. Not to make Unfair use of Position. A promoter must not make an unfair or unreasonable use of his position and must take care to avoid anything which
has the appearance of undue influence or fraud.
4. Full Disclosure to the Company. A promoter must make full disclosures of material facts and of his personal interest or profits to the company regarding

the transactions, conducted with it. He can sell his own business to the company at a profit. It is not forbidden by law. However, he has to make a full
disclosure in this connection to an independent .Board of Directors or to the shareholders as a body by means of a prospectus.