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1
A Report On
Submitted to
Miaza Waheed
Baig
IMS-BZU
Capital & Financing of
Company
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Submitted to: Mirza Waheed Baig
Group Member: MB-09-101 Muhammad
Zeshan Ali
MB-09-025 Mariam
Batool
MB-09-031 Abeera
Riaz
MBA (Morning)
Section 1
2009-12
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PREFACE
This report is submitted in the practicalacknowledgement of corporate law course. Thisreport is developed from lectures and the datafrom internet in whish we have defined aboutthe human rights it contains work done fromJanuary to April 2010.
ACKNOWLEDGEMENT
We are heartily thankful to our teacher,Mr.Mirza Waheed Baig, whose encouragement,guidance and support from the initial to the finallevel enabled us to develop an understanding ofthe subject and in writing the report about oursubject from we have learn a lot because it is a
demonstration of our ability in research,analysis, and effectiveness of expression. After
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writing our report ideally adds to the store ofhuman knowledge and serves as a contributionto future researchers.
Lastly, we offer our regards and blessings to allof those who supported us in any respect duringthe completion of the report.
Table of ContentsPREFACE ............................................................................................................... 3
ACKNOWLEDGEMENT ........................................................................................... 3
Table of Contents ................................................................................................. 4
CAPITAL & FINANCE OF A COMPANY.....................................................................6
Introduction ......................................................................................................... 6
Sources of capital................................................................................................. 8
Own and borrowed capital.................................................................................... 8
Debenture ............................................................................................................ 9
Share .................................................................................................................. 10
Differences between shares and debentures ..................................................... 12ADVANTAGES OF DEBENTURE ............................................................................ 12
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DISADVANTAGES OF DEBENTURE ...................................................................... 13
ADVANTAGES OF SHARES .................................................................................. 13
DISADVATAGE OF SHARES ................................................................................. 14
Stock exchange .................................................................................................. 14
CAPITAL & FINANCING OF COMPANY IN PAKISTAN.............................................15
ALLOTMENT, ISSUE AND TRANSFER OF SHARES AND DEBENTURES .................. 15
Issue of securities outside Pakistan................................................................... 16
CERTIFICATE OF SHARES AND DEBENTURES ...................................................... 17
TRANSFER OF SHARES AND DEBENTURES ......................................................... 17
Application of premium received on issue of shares.- ........................................ 18
Deposits not to be invited without issuing an advertisement.- .......................... 20
Notice to registrar of consolidation of share capital, etc...- ............................... 21
Notice of increase of share capital or of members ........................................... 22
Perpetual debentures.- ....................................................................................... 23
Issue of securities and redeemable capital not based on interest.- ....................23
CAPITAL & FINANCING OF COMPANY IN U.K........................................................24
Company act 2006 ............................................................................................. 24
Allotment of shares ............................................................................................ 27
Resolution required for all shares ....................................................................... 27
Paid up at the time of allotment ......................................................................... 28
Bonus shares ..................................................................................................... 29
If a person refuses to pay for shares? ................................................................ 30
Types of shares .................................................................................................. 31
Class rights be amended .................................................................................... 32
Redeemable shares be used to reduce issued capital........................................ 33
IF COMPANIES PURCHASES ITS OWN SHARES .................................................... 33
Purchase of shares through broker ..................................................................... 34
Process of transfer to new shares ...................................................................... 34
Registration cost ................................................................................................ 36
Form Numbers .................................................................................................... 37
When the application for registration reaches Companies House ...................... 38
If a company is oversea ...................................................................................... 39
COMPARISION OF LAW OF CAPITAL & FINANCING IN PAKISTAN & U.K................39
Similarities: ..................................................................................................... 39
Differences: ........................................................................................................ 41
Bibliography ....................................................................................................... 42
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CAPITAL & FINANCE OF A COMPANY
Introduction
Financial capital is a term that refers to assets that are considered tobe liquid in nature. That is, a capital asset of this type can be used tomake purchases of various goods and services or to acquire othertypes of assets. Business owners make use of financial capital to
secure the resources needed to operate a business and supplyproducts and services to their customers.
Business owners make use of financial capital to secure the resourcesneeded to operate a business and supply products and services totheir customers. Financial capital is money usedby company and businesses to buy what they need to make theirproducts or provide their services or to that sector of the economybased on its operation, i.e. retail, corporate, investment banking, etc.
In economics, capital or capital goods or real capital are factors ofproduction used to create goods or services that are not themselvessignificantly consumed (though they may depreciate) in theproduction process. Capital goods may be acquired
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with money or financial capital.
Finance and accounting
Capital generally refers to saved-up financial wealth especially thatused to start or maintain a business. A financial concept of capital is
adopted by most entities in preparing their financial reports. Under afinancial concept of capital, such as invested money or investedpurchasing power, capital is synonymous with the net assets or equityof the entity. Under a physical concept of capital, such as operatingcapability, capital is regarded as the productive capacity of the entitybased on, for example, units of output per day. Financial capitalmaintenance can be measured in either nominal monetary units orunits of constant purchasing
Corporate financeIs an area of finance dealing with financial decisions businessenterprises make and the tools and analysis used to make thesedecisions. The primary goal of corporate finance is to maximizecorporate while managing the firm's financial risks. Although it is inprinciple different from managerial finance which studies the financialdecisions of all firms, rather than corporations alone, the mainconcepts in the study of corporate finance are applicable to thefinancial problems of all kinds of firms. The discipline can be dividedinto long-term and short-term decisions and techniques. Investmentdecisions are long-term choices about which projects receiveinvestment, whether to finance that investment with equity or debt,and when or whether to pay dividends to shareholders. On the otherhand, the short term decisions can be grouped under the heading"Working capital management". This subject deals with the short-termbalance ofcurrent assets and current liabilities; the focus here is onmanaging cash, inventories, and short-term borrowing and lending(such as the terms on credit extended to customers).
Financial capital vs. real capitalFinancial Capital refers to the funds provided by lenders (andinvestors) to businesses to purchase real capital equipment forproducing goods/services. Real Capital or Economic Capital comprisesphysical goods that assist in the production of other goods andservices, e.g. shovels for gravediggers, sewing machines for tailors, ormachinery and tooling for factories.
Furthermore, financial capital is any liquid medium or mechanism thatrepresents wealth, or other styles ofcapital. It is, however, usually
purchasing power in the form of money available for the production orpurchasing of goods, etcetera. Capital can also be obtained by
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producing more than what is immediately required and saving thesurplus.
Financial capital has been subcategorized by some academic aseconomic or productive capital necessary for operations signalingcapital which a company financial strength to shareholder and
regulatory capital which fulfill capital requirement.
Sources of capitalSources are the place from where capital and financial need of acompany full filled.
Long Term - usually above 7 years
o Share Capital
o Mortgage
o Retained Profit
o Venture Capital
o Debenture
o Project Finance
Medium Term - usually between 2 and 7 years
o Term Loans
o Leasing
o Hire Purchase
Short Term - usually under 2 years
o Bank Overdraft
o Trade Credit
o Deferred Expenses
o Factoring
Own and borrowed capital
Capital contributed by the owner or entrepreneur of a business, andobtained, for example, by means of savings or inheritance, is knownas own capital or equity, whereas that which is granted by anotherperson or institution is called borrowed capital, and this must usuallybe paid back with interest. The ratio between debt and equity isnamed leverage. It has to be optimized as a high leverage can bring ahigher profit but create solvency risk.
Borrowed capital8
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This is capital which the business borrows from institutions or people,and includes debentures:
Redeemable debentures
Irredeemable debentures
Debentures to bearer
Ordinary debentures
Own capital
This is capital that owners of a business (shareholders and partners,for example) provide:
Preference shares/hybrid source of finance
Ordinary preference shares
Cumulative preference shares
Participating preference shares
Ordinary shares
Bonus shares
Founders' shares
These have preference over the equity shares. This means thepayments made to the shareholders are first paid to the preferenceshareholder(s) and then to the equity shareholders.
Debenture
A debenture is a document that either creates a debt oracknowledges it. The term is used incorporate finance for a medium tolong-term debt instrument used by large companies to borrow money.In some countries the term is used interchangeably with bond, loanstock or note.
Debentures are generally freely transferable by the debenture holder.Debenture holders have no voting rights and the interest paid to themis a charge against profit in the company's financial statements.
Debenture refers specifically to an unsecured corporate bond i.e., abond that does not have a certain line of income or piece of propertyor equipment to guarantee repayment ofprincipal upon thebond's maturity.
However, in the United Kingdom a debenture is usually secured. InAsia, if repayment is secured by a charge over land, the loandocument is called a mortgage; where repayment is secured by a
charge against other assets of the company, the document is called a
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debenture; and where no security is involved, the document is calleda note or 'unsecured deposit note'.
Types
There are two types of debentures:
1. Convertible debentures, which are convertible bonds or bondsthat can be converted into equity shares of the issuing company aftera predetermined period of time. "Convertibility" is a feature thatcorporations may add to the bonds they issue to make them moreattractive to buyers. In other words, it is a special feature that acorporate bond may carry. As a result of the advantage a buyer getsfrom the ability to convert; convertible bonds typically have lowerinterest rates than non-convertible corporate bonds.
2. Non-convertible debentures, which are simply regular debentures,cannot be converted into equity shares of the liable company. They
are debentures without the convertibility feature attached to them. Asa result, they usually carry higher interest rates than their convertiblecounterparts.
Share
Share is a unit of account for various financial instruments includingstocks (ordinary or preferential), and investments in limitedpartnerships, and REITs. The common feature of all these is equity
participation (limited in the case of preference shares).Shareholders and dividends
The income received from shares is called a dividend, and a personowning shares is called a shareholder. This is usually in a large andmedium sized business but not necessary in a small business which ismore focused on trying to survive.
Valuation
Shares are valued according to various principles in different markets,but a basic premise is that a share is worth the price at which atransaction would be likely to occur were the shares to be sold.The liquidity of markets is a major consideration as to whether a shareis able to be sold at any given time. An actual sale transaction ofshares between buyer and seller is usually considered to provide thebest prima-facie market indicator as to the 'true value' of shares atthat particular moment.
Issued share capital
The issued share capital of a company is the total nominal value of theshares of a company which has been issued to shareholder and which
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remain outstanding (i.e. have been redeemed or repurchase to beheld in treasury).these shares along with the share premium accountrepresent the capital invested by the shareholder in the company .theissued share capital may be less than authorized share capital thelatter total value of the shares that are available for the issue of theshare company.
Called up share capital
Called up Share Capital is the total amount of issued capital for whichthe shareholders are required to pay.
Paid up share capital
Paid up Share Capital is the amount of share capital paid by theshareholders.
Authorized share capital
This is the total number of shares that a Company can issue inaccordance with its Memorandum of Association.
The shares can be either Ordinary or Preference (but are not part ofthe calculations).
The income received from shares is called a dividend, and a personowning shares is called a shareholder. This is usually in a large andmedium sized business but not necessary in a small business which is
more focused on trying to survive.
Shares are valued according to various principles in different markets,but a basic premise is that a share is worth the price at which atransaction would be likely to occur were the shares to be sold.The liquidity of markets is a major consideration as to whether a shareis able to be sold at any given time. An actual sale transaction ofshares between buyer and seller is usually considered to provide thebest prima-facie market indicator as to the 'true value' of shares atthat particular moment.
Issued share capital
The issued share capital of a company is the total nominal value of theshares of a company which have been issued to shareholders andwhich remain outstanding (i.e. have not been redeemed orrepurchased to be held in treasury). These shares, along with theshare premium account, represent the capital invested by theshareholders in the company. The issued share capital may be lessthan the authorized share capital, the latter being the total value of
the shares that are available for issue by the company.
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PREFERENCE SHARES
attract a fixed percentage dividend annually
Holders have the right to receive dividends before ordinaryshareholders
Less risky investment than ordinary shares Potential for repayment of capital before ordinary shareholders inthe
Additional Shares
could be issued to current or new shareholders
This would have the effect of increasing the companys capital
Dividends would have to be paid.
Differences between shares anddebentures
Shareholders are effectively owners; debenture-holders arecreditors.
Shareholders may vote at AGMs and be elected as directors;debenture-holders may not vote at AGMs or be elected as directors.
Shareholders receive profit in the form of dividends; debenture-holders receive a fixed rate of interest.
If there is no profit, the shareholder does not receive a dividend;interest is paid to debenture-holders regardless of whether or not a
profit has been made. In case of dissolution of firms debenture holders are paid first ascompared to shareholder.
Fixed capital
This is money which is used to purchase assets that will remainpermanently in the business and help it to make a profit
ADVANTAGES OF DEBENTURE
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Because the lender does not have a claim to equity in thebusiness, debt does not dilute the owner's ownership interest in thecompany.
A lender is entitled only to repayment of the agreed-uponprincipal of the loan plus interest, and has no direct claim on future
profits of the business. If the company is successful, the owners reapa larger portion of the rewards than they would if they had sold stockin the company to investors in order to finance the growth.
Except in the case of variable rate loans, principal and interestobligations are known amounts which can be forecasted and plannedfor.
Interest on the debt can be deducted on the company's taxreturn, lowering the actual cost of the loan to the company.
Raising debt capital is less complicated because the company is
not required to comply with state and federal securities laws andregulations.
The company is not required to send periodic mailings to largenumbers of investors, hold periodic meetings of shareholders, andseek the vote of shareholders before taking certain actions.
DISADVANTAGES OF DEBENTURE
Unlike equity, debt must at some point be repaid.
Interest is a fixed cost which raises the company's break-evenpoint. High interest costs during difficult financial periods can increasethe risk of insolvency. Companies that are too highly leveraged (thathave large amounts of debt as compared to equity) often find itdifficult to grow because of the high cost of servicing the debt.
Cash flow is required for both principal and interest payments andmust be budgeted for. Most loans are not repayable in varyingamounts over time based on the business cycles of the company.
Debt instruments often contain restrictions on the company's
activities, preventing management from pursuing alternative financingoptions and non-core business opportunities.
The larger a company's debt-equity ratio, the more risky thecompany is considered by lenders and investors. Accordingly, abusiness is limited as to the amount of debt it can carry.
The company is usually required to pledge assets of the companyto the lender as collateral, and owners of the company are in somecases required to personally guarantee repayment of the loan.
ADVANTAGES OF SHARES
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The funding is committed to your business and your intendedprojects. Investors only realize their investment if the business isdoing well, egg through stock market flotation or a sale to newinvestors.
The right business angels and venture capitalists can bring
valuable skills, contacts and experience to your business and canassist with strategy and key decision making.
In common with you, investors have a vested interest in thebusiness' success, i.e. its growth, profitability and increase in value.
Investors are often prepared to provide follow-up funding as thebusiness grows.
DISADVATAGE OF SHARES
Raising equity finance is demanding, costly and time consuming.Your business may suffer as you devote time to the deal. Potentialinvestors will seek background information on you and your business -they will closely scrutinize past results and forecasts and will probethe management team. However, many businesses find this disciplineuseful regardless of whether or not they actually receive any funding.
Depending on the investor, you will lose a certain amount of yourpower to make management decisions.
You will have to invest management time to provide regular
information for the investor to monitor.
At first you will have a smaller share in the business - both as apercentage and in absolute monetary terms. However, your reducedshare may become worth a lot more in absolute monetary terms if theinvestment leads to your business becoming more successful.
There can be legal and regulatory issues to comply with whenraising finance, e.g. when promoting investments.
Stock exchange
A stock exchange is an entity which provides "trading" facilitiesfor stock brokers and traders, to trade stocks and other securities.Stock exchanges also provide facilities for the issue and redemption ofsecurities as well as other financial instruments and capital eventsincluding the payment of income and dividends. The securities tradedon a stock exchange include: shares issued by companies, unittrusts, derivatives, pooled investment products and bonds.
To be able to trade a security on a certain stock exchange, it has to belisted there. Usually there is a central location at least forrecordkeeping, but trade is less and less linked to such a physicalplace, as modern markets are electronic networks, which gives them
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advantages of speed and cost of transactions. Trade on an exchangeis by members only.
The initial offering of stocks and bonds to investors is by definitiondone in the primary market and subsequent trading is done inthe secondary market. A stock exchange is often the most important
component of a stock market. Supply and demand in stock marketsare driven by various factors which, as in all free markets, affect theprice of stock.
There is usually no compulsion to issue stock via the stock exchangeitself, nor must stock be subsequently traded on the exchange. Suchtrading is said to be off exchange or over-the-counter. This is theusual way that derivatives and bonds are traded. Increasingly, stockexchanges are part of a global market for securities.
CAPITAL & FINANCING OFCOMPANY IN PAKISTAN
In Pakistan capital and financing of company is done through different
processes according to the requirement. Companies Ordinance 1984 isa law related to the working of companies so according to companiesOrdinance 1984 capital and financing have following points.
ALLOTMENT, ISSUE AND TRANSFER OF SHARESAND DEBENTURES
Its the basic step for collecting the capital a company's ordinancehave following sections regarding to allotment. Issue and transfer ofshares and debenture.
Section-62 Offer of shares or debentures for sale by certain persons
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Section-62-A.Issue of securities outside Pakistan
Section-65. Construction of references to offering shares ordebentures to the public etc.
No person who holds more than ten per cent of the shares ordebentures of a company shall offer for sale to the public any shares
or debenture of the company held by him except with the approval ofthe Commission. Any document by which an offer for sale to the publicis made by such person as is referred to in sub-section (1) shall, forall purposes, be deemed to be a prospectus issued by a company, andall enactments and rules of law as to
Issue of securities outside Pakistan.
No company shall, except with the prior approval of the Commission,issue any security outside Pakistan.
Construction of references to offering shares or debentures to thepublic, etc...-
Any reference in this Ordinance or in the articles of a company tooffering of shares or debentures to the public, or to invitation to thepublic to subscribe for shares or debentures, shall, unless otherwiseexpressly provided in this Ordinance, include a reference to offering ofshares or debentures to any section of the public or to invitation toany section of public to subscribe for shares or debentures, as thecase may be.
ALLOTMENT
Allotment relates all the work and law for giving the shares anddebenture to some specific person it has the following sections.
Section-67. Application for, and allotment of, shares and debentures
Section-71. Repayment of money received for shares not allotted
Section-72. Allotment of shares and debentures to be dealt in on stockexchange
Application for, and allotment of, shares and debentures.-
No application for allotment of shares in and debentures of a companyin pursuance of a prospectus shall be made for shares or debenturesof less than such nominal amount as the Commission may, form timeto time, specify, either generally or in a particular case.
The Commission may specify the form of an application forsubscription to shares in or debentures of a company which may,among other matters, contain such declarations or verifications as itmay, in the public interest, deem necessary; and such form then shallform part of the prospectus.
All certificates, statements and declarations made by the applicantshall be binding on him.
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An application for shares in or debentures of a company which ismade in pursuance of a prospectus shall be irrevocable.
Repayment of money received for shares not allotted.-
CERTIFICATE OF SHARES ANDDEBENTURES
Where the certificates of shares and debenture are issued to theirowners is given in following section.
Section-74. Limitation of time for issue of certificates
Limitation of time for issue of certificates
Every company shall, within ninety days after the allotment of any ofits shares, debentures or debenture stock, and within forty-five daysafter the application for the registration of the transfer of anycertificates of all shares, the debentures, and the certificates of alldebenture stock allotted or transferred, and unless sent by post ordelivered to the person entitled thereto, within
That period, shall give notice of this fact to the shareholders ordebenture-holders, as the case may be,
Immediately thereafter in the manner prescribed, unless theconditions of issue of the shares, debentures or debenture stock
otherwise provide.
TRANSFER OF SHARES ANDDEBENTURES
Where some one sell their shares or debenture to some one else sothat process done through following sections.
Section-76. Transfer of shares and debentures
Section-78A. Appeal against refusal for registration of transfer
Section-79. Transfer to successor-in-interest
An application for registration of the transfer of shares and debenturesin a Company either made by the provided that the company shall notregister a transfer of shares or debentures unless proper instrument oftransfer duly stamped and executed by the transferor and thetransferee has been delivered to the company along with the scrip..
Where a transfer deed is lost, destroyed or mutilated before itslodgment, the company may on an application made by the transfereeand bearing the stamp required by an instrument of transfer, registerthe transfer of shares or debentures if the
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Transferee proves to the satisfaction of the directors of the companythat the transfer deed duly executed has been lost, destroyed ormutilated:
Provided that before registering the transfer of shares or debenturesthe company may demand such indemnity as it may think fit.
All references to the shares or debentures in this section, shall in caseof a company not having share capital, be deemed to be references tointerest of the members in the company.
Every company shall maintain at its registered office a register oftransfers of shares and debentures made from time to time and suchregister shall be open to inspection by the members and supply ofcopy thereof in the manner stated in section150.
Nothing in sub-section (1) shall prevent a company from registeringas shareholder or debenture-holder a person to whom the right to any
share or debenture of the company has been transmitted by operationof law.
In the case of a public company, a financial institution dulyapproved by the Commission may be appointed as the transfer agenton behalf of the company.
If a company makes default in complying with any of theprovisions of sub-sections (1) to (4), it shall be liable to a fine notexceeding five thousand rupees and every officer of the company whois knowingly or willfully a party to such default shall be
liable to a like penalty.Notice of refusal to transfer.-
Application of premium received onissue of shares.-
(1) Where a company issues shares at a premium, whether in cash orotherwise, a sum equal to the
aggregate amount or the value of the premiums on those shares shallbe transferred to an account, to be called "the share premiumaccount"; and the provisions of this Ordinance relating to thereduction of the share capital of a company shall, except as providedin this section, apply as if the share premium account were paid-upcapital of the company.
(2) The share premium account may, notwithstanding anythingcontained in sub-section (1), be applied by the company--
A. in writing off the preliminary expenses of the company;
Bin writing off the expenses of, or the commission paid or discountallowed on, any issue of shares or debentures of the company;
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Chin providing for the premium payable on the redemption of anyredeemable preference shares or debentures of the company; or
Din paying up un-issued shares of the company to be issued tomembers of the company as fully paid bonus shares.
(3) Where a company has before the commencement of this
Ordinance, issued any shares at a premium, this section shall apply asif the shares had been issued
After such commencement: Provided that any part of the premiumwhich has been so applied that it does not
at the commencement of this Ordinance that identifies form a part ofthe company's reserves within the meaning of the Fourth Schedule orthe Fifth Schedule shall be disregarded in determining the sum to beincluded in the share premium account.
Power to issue shares at a discount.-(l) Subject to the provisions of this section, it shall be lawful for a
company to issue shares in the company at a discount:
Provided that--
A. the issue of the shares at a discount must be authorized byresolution passed in general meeting of the company and must besanctioned by the commission.
Bathe resolution must specify the maximum rate of discount, 1[], atwhich shares are to be issued;
Cannot less than one year must at the date of issue have elapsedsince the date on which the company was entitled to commencebusiness; and
Dither share to be issued at a discount must be issued within sixtydays after the date on which the issue is sanctioned by theCommission or within such extended time as the Commission mayallow.
(2) Where a company has passed a resolution authorizing the issue ofshares at a discount, it may apply to the Commission for an ordersanctioning the issue;
And on such application the Commission may, if, having regard to allthe circumstances of the case, it thinks proper so to do, make anorder sanctioning the issue on such terms and conditions as it thinksfit
(3) Issue of shares at a discount shall not be deemed to reduction ofcapital.
Further issue of capital.-19
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(1) Where the directors decide to increase the capital of the companyby the issue of further shares, such shares shall be offered to themembers in proportion to the existing shares held by each member,irrespective of
Class and such offer shall be made by notice specifying the number of
shares to which the member is entitled and limiting a time, withinwhich the offer, if not accepted, will be deemed to be declined:
a. [Provided that the Federal Government may, on an applicationmade by any public company on the basis of special resolution passedby it, allow such company to
Raise its further capital without issue of right shares:]
b. [Provided further that a public company may reserve a certainpercentage of further issue of its employees under Employees StockOption Scheme to be approved
By the Commission in accordance with the rules made under thisOrdinance.]
(2) The offer of new shares shall be strictly in proportion to thenumber of existing shares held:
Provided that fractional shares shall not be offered and all fractionsless than a share shall be consolidated and disposed of by thecompany and the proceeds from such
Disposition shall be paid to such of the entitled shareholders as mayhave accepted such offer.
(3) The offer of new shares shall be accompanied by a circular dulysigned by the directors or an officer of the company authorized bythem in this behalf in the form
Prescribed by the Commission containing material information aboutthe affairs of the company, latest statement of the accounts andsetting forth the necessity for issue of further capital.
Deposits not to be invited withoutissuing an advertisement.-
(1)The Federal Government may prescribe the limits up to which, themanner in which and the conditions subject to which deposits may beinvited, accepted or retained by a company.
(2) No company shall invite, or allow any other person to invite orcause to be invited on its behalf, any deposit unless--
a. Such deposit is invited or is caused to be invited in accordance withthe rules made under sub-section (1); and
Ban advertisement, including therein a statement showing thefinancial position of the company, has been issued by the company in
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such form and in such manner as may be prescribed.
(3) The provisions of this Ordinance relating to a prospectus shall, sofar as may be, apply to an advertisement referred to in sub-section(2).
(4) Where a company accepts or invites, or allows or causes any
other person to accept or invite on its behalf, any deposit in excess ofthe limits prescribed under
sub-section (1) or in contravention of the manner or conditionsprescribed under that subsection or in contravention of the provisionsof sub-section (2), as the case may be,--
A. the company shall be punishable,--
(I) where such contravention relates to the acceptance of
Any deposit, with fine which shall not be less than the amount of thedeposits so accepted and,
(ii) Where such contravention relates to the invitation
For, the deposit with fine which may extend to twenty thousandrupees; and
b. every officer of the company which is in default shall be punishablewith imprisonment for a term which may extend to two years andshall also be liable to fine..
Nature of shares and certificate ofshares.-(1)The shares or others interest of any member in a company shall bemoveable property, transferable in the
Manner provided by the articles of the company.
(2) Each share in a company shall have a distinctive number.
(3) A certificate under the common seal of the company specifyingany share held by any member shall be prima facie evidence of the
title of the member to the shares therein specified.
Classes and kinds of share capital.-
A company limited by shares may have different kinds of sharecapital and classes provided by its memorandum and articles:
Provided that different rights and privileges in relation to the differentclasses of shares may only be conferred in such manner as may beprescribed.
Notice to registrar of consolidation of
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share capital, etc...-
(1)Where a company having a share capital has consolidated anddivided its share capital into shares of larger amount than its existingshares, it shall, within fifteen days of the consolidation and division,file notice with the registrar of the same, specifying the shares
Consolidated and divided.
(2) If a company makes default in complying with the requirements ofsubsection (5) of section 92 or sub-section (1) of this section, it shallbe liable to a fine which may extend to one hundred rupees for everyday during which the default continues, and every officer of thecompany who knowingly and willfully authorizes or permits the defaultshall be liable to the like penalty.
a. [Provided that where default is made by a company in filing anotice of increase in the authorized capital under sub-section (3-A) ofsection 92, the scheduled bank or the
Financial institution to whom shares have been issued may file noticeof such increase with the registrar and such notice shall be deemed tohave been filed by the company itself and the scheduled bank orfinancial institution shall be entitled to recover from the company
Notice of increase of share capital or
of membersWhere a company having a share capital has resolved to increase itsshare capital beyond the authorized capital 2[or such capital isincreased under sub-section (3-A) of section 92] and where acompany not having a share capital has resolved to increase thenumber of its members beyond the number previously registered, itshall file with the registrar, within fifteen days after the passing of theresolution, a notice of the increase of capital or members, as the casemay be, and the registrar shall record the increase.
(1)[Provided that where default is made by a company in filing anotice of increase in the authorized capital under sub-section (3-A) ofsection 92, the scheduled bank or
The financial institution to whom shares have been issued may filenotice of such increase with the registrar and such notice shall bedeemed to have been filed by the company itself and the scheduledbank or financial institution shall be entitled to recover from thecompany
The amount of any fee properly paid by it to the registrar in respect ofsuch increase
(2) The notice to be given under sub-section (1) shall includeparticulars of the shares to be affected and the conditions, if any,
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subject to which the new shares are to
Be issued.
(3) If a company makes default in complying with the requirements ofsubsection
(a), it shall be liable to a fine which may extend to one hundredrupees for every day during which the default continues, and everyofficer of the company who knowingly and willfully authorizes orpermits the default shall be liable to the like penalty.
(4) No resolution referred to in sub-section (1) shall take effectunless the notice required by that sub-section to be filed with theregistrar is duly sent to him.
Reduction of share capital.-
Perpetual debentures.-A condition contained in any debenture or any
deed for securing any debentures, whether issued or executed beforeor after the promulgation of this Ordinance, shall not be invalid byreason only that thereby the debentures are made irredeemable orredeemable only on the happening of a contingency, however remote,or on the expiration of a period however long.
Issue of securities and redeemablecapital not based on interest.-
(1) [A company may by public offer or], upon terms and conditionscontained in an agreement in writing, issue to one or more scheduledbanks, financial institutions or such other persons as are specified forthe purpose by the Federal Government by notification in the officialGazette, either severally, jointly or through their syndicate, anyinstrument in the nature of redeemable capital in any or several forms
in consideration of any funds, moneys or accommodations received orto be received by the company, whether in cash or in specie or againstany promise, guarantee, undertaking or indemnity issued to or infavor of or for the benefit of the company.]
(2) In particular and without prejudice to the generality of theforgoing provisions, the agreement referred to in sub-section (1) forredeemable capital may provide for, adopt or include, in addition toothers, all or any of the following matters,
(a) Mode and basis of repayment by the company of the amountinvested in redeemable capital within a certain period of time.
(b) Arrangement for sharing of profit and loss;
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(c) creation of a special reserve called the "participation reserves bythe company in the manner provided in the agreement for the issue ofparticipatory redeemable capital in which all providers of such capitalshall participate for interim and final adjustment on the maturity datein accordance with the terms and conditions of such agreements ; and
(d) in case of net loss on participatory redeemable capital on the dateof maturity, the right of holders to convert the outstanding, balance ofsuch capital or part thereof as provided in the agreement into ordinaryshares
of the company at the break-up price calculated in the prescribedmanner.
(3) The terms and conditions for the issue of instruments orcertificates of redeemable capital and the rights of their holders shallnot be challenged or questioned by
the company or any of its shareholders as repugnant to any provisionof this Ordinance or any other law or the memorandum or articles orany resolution of the general meeting or directors of the company orany other documents..
(4) The provision of this Ordinance 1[.....] relating to the creation,issue,
Increase or decrease of the capital shall not apply to the redeemablecapital.]
CAPITAL & FINANCING OF
COMPANY IN U.K
Company act 2006
The Companies Act 2006 is the largest single piece of legislation everintroduced in Europe. Whilst intended as a simplification of companylaw bringing in much de-regulation of small companies, it is clear tothe business community at large that there is a great deal of changeinvolved, much of which is not exactly obvious at the outset.
Over the last two or three years, various parts of the new law havebeen gradually introduced, but from 1st October 2009, all remaining
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provisions in The Companies Act 2006 (CA2006) come into force thusentirely replacing the Companies Act 1985.
Of most significance with this final implementation are the provisionsrelating to incorporations and articles of association. There arefundamental changes involved, which may be well known to many
professional advisers but may not be so obvious to others.The following sets out some of the key points of interest. These pagesare by no means intended as a comprehensive guide and give only abrief general note on the issues covered. Further information isavailable on request and specific professional advice should be takenwhere necessary:
Companies House Filings
We understand that Companies House will be taking a much more
rigid approach to the deadlines for filing various documents with theRegistrar of Companies under the CA2006. The new Act allows theRegistrar to prescribe and enforce penalties in circumstances wheredocuments are not filed on time.
For example, when a company adopts a special resolution that makesany amendment to its Articles, a consolidated set of the revisedArticles must be filed with the Registrar within 14 days. If this is notdone we understand that Companies House issue a reminder that ifnot complied with within the prescribed time period, then anautomatic 200 civil penalty will be applied.
Companies House filing deadlines for accounts of private companieshave already been reduced to 9 months for financial periodscommencing on or after 6 April 2008.
Filling of account
Companies House filing deadlines for accounts of private companies
have already been reduced to 9 months for financial periodscommencing on or after 6 April 2008.
Public companies now have only 6 months to file their accounts.
The unofficial 14 day concession for unsigned accounts has beenremoved and Companies House has advised that they will issue latefiling penalties if the signed accounts are subsequently filed after thedeadline.
Once again we would like to bring our Company View system to mind.This system provides a complete managed service to keep on top on
Companies House filings, make sure that the new law is followedcorrectly and provides pro-active monitoring of all your client recordsallowing you to access your client company records online, manage
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filing deadlines more efficiently and allows clients to file accountselectronically from the Company View web site.
Share capital
When a company is formed, the person or people forming it decidewhether its members' liability will be limited by shares. Thememorandum of association (one of the documents by which thecompany is formed) will state:
the amount of share capital the company will have; and
The division of the share capital into shares of a fixed amount.
The members must agree to take some, or all, of the shares when thecompany is registered. The memorandum of association must showthe names of the people who have agreed to own shares and the
number of shares each will own. These people are called thesubscribers.
Authorized capital
The amount of share capital stated in the memorandum of associationis the company's 'authorized' or 'nominal' capital.
Maximum or minimum share capital
There is no maximum to any company's authorized share capital andno minimum share capital for private limited companies. However, apublic limited company must have an authorized share capital of atleast 50,000 (and, if it is trading, issued capital of 50,000 -
Alteration in authorized share capital
A company can increase its authorized share capital by passing anordinary resolution (unless its articles of association require a special
or extraordinary resolution). A copy of the resolution - and notice ofthe increase on Form 123 - must reach Companies House within 15days of being passed.
A company can decrease its authorized share capital by passing anordinary resolution to cancel shares which have not been taken oragreed to be taken by any person. Notice of the cancellation, on Form122, must reach Companies House within one month.
For information about resolutions, see our booklet, 'Resolutions'.
Issued share capitalIssued capital is the value of the shares issued to shareholders. This
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means the nominal value of the shares rather than their actual worth.The amount of issued capital cannot exceed the amount of theauthorized capital.
A company need not issue all its capital at once, but a public limitedcompany must have at least 50,000 of allotted share capital. Of this,
25% of the nominal value of each share and any premium must bepaid up before it can start business or borrow.
Getting a 'Certificate to commence business and borrow'
If a new company is incorporated as a plc, it must deliver a statutorydeclaration on Form 117 confirming that its share capital is at leastthe statutory minimum. The Registrar will then issue a certificateentitling it to do business and borrow - see our booklet, 'CompanyFormation' for more information.
A company may increase its issued capital by allotting more shares
but only up to the maximum allowed by its authorized capital.Allotments must only be done under proper authority
A public company may allot shares to the general public. Shareoffers to the public are made in a prospectus. For more information onprospectuses, see chapter 3.
A private company is normally restricted to issuing shares to itsmembers, to staff and their families and to debenture holders.However, by private arrangement, the company may issue shares toanyone it chooses.
Allotment of shares
'Allotment' is the process by which people become members of acompany. Subscribers agree to take shares on incorporation and theshares are regarded as 'allotted' to each member on incorporation.
Later, more people may be admitted as members of the company andbe allotted shares. However, the directors must not allot shareswithout the authority of the existing shareholders. The authority will
either be stated in the company's articles of association or given tothe directors by resolution passed at a general meeting of thecompany.
Resolution required for all shares
Any public or private company with share capital may give authorityby ordinary resolution. The authority must be for a fixed period of upto five years. Any ordinary resolution giving, varying, revoking orrenewing an authority to allot shares must be delivered to CompaniesHouse within 15 days of being passed.
A private company with share capital may instead pass an 'elective
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resolution', to give, or renew, an authority. This authority can be forany fixed period, which may be longer than five years. It can also befor an indefinite period. An elective resolution must also be deliveredto Companies House within 15 days of being passed.
Paid up at the time of allotmentNo. Payment may be deferred until later. However, shares in a publiccompany must be allotted as paid-up to at least a quarter of theirnominal value and the whole of any premium (except that this doesnot apply to shares allotted under an employees' share scheme).
As a general rule, a company may allot bonus shares to members asfully paid-up. A company which has funds available for the purposemay also pay up any amounts unpaid on its shares.
A company's shares must not be allotted at a discount.
When payment is in cash
No, it can be in goods, services, property, good will, know-how, oreven shares in another company. The latter is often used when onecompany takes over another.
Public companies are more restricted in what they may accept inpayment for shares. Non-cash payments must be valued before
shares are allotted. A copy of the valuation report must be deliveredto Companies House with Form 88(2).
Generally shares may be allotted for payment:
Wholly for cash;
Partly for cash and partly for a non-cash payment; or
Wholly for a non-cash payment.
If payment include non-cash payment
Yes. Form 88(2) must show the extent to which the shares are to betreated as paid-up. This must be stated as a percentage.
Calculating the extent to which shares are paid-up If an allotment ispartly for cash and partly for a non-cash payment, then the extent towhich the shares are treated as paid-up must include the cash and non-cash elements. For example, a 1 share allotted for 50p in cash and 50pin services is still 100% paid-up.
Form 88(2) must also include a brief description of the non-cashpayment for which the shares were allotted (for example, '100ordinary shares of 1 in XYZ limited'). It must be accompanied by thewritten contract under which title of the shares is constituted. The
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Registrar will accept acetified copy of the stamped contract forregistration.
If there is no written contract, a stamped Form 88(3) must bedelivered to Companies House with Form 88(2) within one month ofthe allotment. Form 88(3) is not acceptable when there is a written
contract.
Stamp dutyAcquiring shares for a non-cash payment involves the transfer ofproperty, which may amount to a chargeable transaction under theStamp Act. The Inland Revenue must already have stamped the writtencontract or Form 88(3) before it is sent to Companies House, confirmingthat stamp duty has been paid or that none is payable.
Bonus sharesIf authorized by its articles, a company may transfer profits to a fundcalled its 'capital redemption reserve' and use it to issue 'bonus'shares to the members in proportion to their existing holdings. Sincethe issue may reduce the amount of money available for payingdividends, the term 'bonus' is not always appropriate. The correctterm is 'capitalization of reserves' but the terms 'scrip' or 'scrip issues'are also used to describe such shares.
A company can also use a capitalization of distributable profits to
Credit partly paid shares with further amounts to make them paid up.
Pre-emption rights
These are the rights of existing members to be offered new shares onbeneficial terms by the company. 'Pre-emption' rights give membersthe opportunity to accept, reject or renounce a share offer in favor ofsomeone else before the company offers new shares elsewhere.
Note: pre-emption rights do not apply to allotments that are issued aswholly or partly paid-up for a non-cash payment or shares in anemployee share scheme. (An employee share scheme means a
scheme for encouraging share ownership by employees, formeremployees and their families.)
The memorandum or articles of a private company may exclude pre-emption rights. However, a public company cannot have such aclause.
For a particular share issue, the Companies Act 1985 allows acompany to pass a special resolution not to apply pre-emption rights.This is known as the 'misapplication of pre-emption rights'. Theresolution will apply to the one issue only; a further resolution is
needed if similar conditions were to apply to another share issue. Acopy of the special resolution must be delivered to Companies Housewithin 15 days of being passed.
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If a person refuses to pay for shares?
A member is liable to pay up the nominal value of each of his sharesand the amount owing to the company is a debt which can be 'called
up'.If a member refuses to pay all or any call on a share, the companymay use forfeiture proceedings if permitted by its articles. A typicalprocedure is set out in paragraphs 18-22 of Table A of The Companies(Tables A to F) Regulations 1985 (if alternative provisions have notbeen adopted). As these proceedings are of a penal nature theregulations must be followed exactly, otherwise the court may declareforfeiture proceedings void.
A forfeited share may be sold, re-allotted or otherwise disposed of atthe discretion of the directors. Companies House need not be notifiedof the forfeiture or re-allotment except in the list of members on thecompany's next annual return.
If a member cannot pay a call on shares, and if the member and thecompany agree, the shares may be surrendered to the company. Thishas the same effect as forfeiture but avoids the formal procedure. Thecompany may only accept surrender if it could have used its power offorfeiture.
A private company may hold forfeited shares indefinitely pending re-allotment. A public company must cancel the forfeited shares if they
are not otherwise disposed of after three years. If the cancellationwere to reduce a public company's allotted capital below the statutoryminimum, it would have to re-register as a private company.
A company cannot use forfeited shares for the purposes of voting.
16. What is paid-up capital, uncalled capital, reserve capital and sharepremium?
These terms are used to describe the make-up of a company's sharecapital:
Paid-up capital is the issued capital which has been fully or partlypaid-up by the shareholders;
Uncalled capital is that part of the issued capital on which thecompany has not requested payment;
reserve capital is that part of the share capital that the companyhas decided will only be called up if the company is being wound upand for the purposes of it being wound up;
Share premium is the excess paid above a share's nominal value.This excess must be recorded separately in the company books in a
'share premium account' and used for the purposes specified inSection 130 of the Companies Act 1985 (for example, in paying upunissued shares to be allotted to members as fully paid-up bonus
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shares.)
As an example, if a company issues 1,000 shares at 1 each, paid-upto 20% of their value with a 10% reserve and a share premium of50p, the capital is:
paid-upcapital
= 200 (1,000x0.20)
reservecapital
= 100(1,000
x0.10)
uncalledcapital
= 700(1,000
x
0.70)
sharepremium
= 500(1,000
x0.50)
Types of sharesA company may have as many different types of shares as it wishes,
all with different conditions attached to them. Generally share typesare divided into the following categories:
Ordinary As the name suggests these are the ordinary shares ofthe company with no special rights or restrictions. They may bedivided into classes of different value.
Preference these shares normally carry a right that any annualdividends available for distribution will be paid preferentially on theseshares before other classes.
Cumulative preference these shares carry a right that, if the
dividend cannot be paid in one year, it will be carried forward tosuccessive years.
Redeemable these shares are issued with an agreement that thecompany will buy them back at the option of the company or theshareholder after a certain period, or on a fixed date. A company
Cannot issue redeemable shares only.
Shares are in any currency?
Yes and different types of share may be in different currencies.However, a public limited company must have at least 50,000 of its
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issued capital in sterling, irrespective of what other currency it uses.
Change in the currency of shares
However, a company may purchase its own shares and allot shares in
a different currency or it may seek a court order to reduce its issuedcapital to zero, cancel its authorized capital, and simultaneously createcapital and allot shares on a proportional basis in the new currency.Remember that a public limited company must always have a sterlingshare capital of at least 50,000.
Change in shares
If authorized by its articles of association, a company may pass anordinary resolution to:
consolidate and divide its share capital into shares of largeramounts than its existing shares, for example 200 shares of 1 maybe consolidated and divided into 100 shares of 2;
sub-divide its shares, or any of them, into shares of smalleramounts, for example, a 1 share may be divided into 10 shares of10p;
convert all or any of its paid-up shares into stock or re-convertstock into shares. A company cannot issue stock in the first instance.It can only convert issued shares into stock. (Converting shares into
stock means treating them as one merged fund equivalent to thenominal value of the individual shares. For example, 100 shares of 1each would convert to 100 stock.)
In all the above cases, the total authorized and issued share capitalremains unaltered. Notice of the change must reach Companies House onForm 122 within one month.
Class rights be amendedYes. A company may alter the rights attached to any class of shares.How this can be done depends on whether the rights stem from thememorandum or articles or elsewhere. However, a company cannotconvert non-redeemable shares into redeemable shares.
Dissenting shareholders who hold at least 15% of the issued shares ofthat class may apply to the court to have the variation cancelled. Theymust do this within 21 days after consent was given or a resolutionpassed to vary the rights. The company must deliver a copy of thecourt order to Companies House within 15 days of it being made.
Special rights attached to shares and newly created class rightsThe following forms must be delivered to Companies House within one
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month in the circumstances described:
When a company allots shares with rights that are not stated inthe memorandum or articles or in a resolution or agreement that mustbe sent to Companies House: use Form 128(1).
When a company varies the rights attached to shares except by
amending the memorandum or articles or by a resolution oragreement that must be sent to Companies House: use Form 128(3).
When a company assigns a name or new name to any class of itsshares except by amending the memorandum or articles or by aresolution or agreement that must be sent to Companies House:use Form 128(4).
Redeemable shares be used to reduce issued
capitalA company which has issued redeemable shares may reduce its issuedshare capital by redeeming them in accordance with the agreementunder which they were issued. However, if the shares are not returned tothe company in accordance with the agreement - for example, if they arereturned earlier than stated in the agreement - then the transaction mustbe dealt with as a purchase of the company's own shares. Notification ofredemption of shares must be delivered to Companies House within onemonth on Form
IF COMPANIES PURCHASES ITS OWNSHARES
If permitted by its articles, a company may pass a special resolutionto buy some of its shares. But it cannot do so if this would leave onlyredeemable shares in issue.
The terms of the resolution will depend on whether it is a 'marketpurchase' - that is, made on a recognized stock market - or an 'off-
market purchase'.An off-market purchase may only be made:
in accordance with the terms of a contract authorized in advanceof the purchase by a special resolution; or
Under the terms of any contingent purchase contract that hasbeen approved in advance by a special resolution.
Purchase by a company of its own shares must be notified to CompaniesHouse within 28 days on Form 169Purchase of own shares out of capital (private companies only) If a
purchase by a private company is financed by payment out of its capital,the directors must also have made a statutory declaration on Form
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173 about the solvency of the company immediately after the purchaseand in the next financial year. A report by the company's auditorconfirming the directors' opinion must be attached to the form anddelivered to Companies House no later than the day on which notice ofthe proposed payment out of capital is first published. (Requirements forpublishing the notice are covered by section 175 of the Companies Act
1985.)
Purchase of shares through broker
Shares in a public company are normally transferred through a brokerdealing in the market appropriate to those shares, that is, the StockExchange or the Alternative Investment Market. However, shares maybe transferred directly from seller to buyer and the company informedaccordingly.
Shares in a private company are usually transferred by privateagreement between the seller and the buyer. In both cases, a transferdocument must be completed.
The transfer of shares is normally a chargeable transaction under theStamp Act. Stamp Duty is payable to the Inland Revenue on theaggregate amount at % rounded up to the nearest multiple of 5.
Process of transfer to new shares
The transfer of shares in a public limited company is dealt withthrough the Stock Exchange's 'Crest' system.
To transfer shares in a private or unlimited company, a seller mustcomplete and sign the appropriate section of a 'stock transfer form',available from law stationers, and pass it, together with the sharecertificate, to the new owner.
The new owner must then complete their section of the stock transferform, pay any stamp duty to the Inland Revenue and pass thecompleted form and share certificate to the company. The company
secretary will then arrange for the directors to authorize the change tothe members' register and issue a share certificate in the new name.
Do not send stock transfer forms to Companies House. They should bekept with the company's own records
Transmission of shares
In some instances shares may be transmitted by operation of law. Themain examples of this are when a registered shareholder dies orbecomes bankrupt.
On death, shares held in the sole name of the deceased are vested inthe personal representative or executor of the deceased. This person
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should inform the company and provide all necessary evidence thatthe company might need so that the fact can be registered and thepersonal representative receive all notices and dividends relating tothe shares. On the winding up of the deceased's estate, the personalrepresentative must inform the company of the beneficiary (orbeneficiaries) of the shares so that the necessary alterations to the
register of members may be made and new certificates issued.
If a share is jointly held, the survivor(s) will be the only person(s)recognized as having title to the share. The company should beinformed immediately and be given any necessary evidence of thedeath in order to alter the register of members and issue a new sharecertificate.
Share warrants
If authorized by its articles, a company may convert any fully paidshares to 'share warrants'. These warrants are easily transferablewithout any need for a transfer document, that is, they can simply bepassed from hand to hand.
When share warrants are issued, the company must strike out thename of the shareholder from its register of members and state thedate of issue of the warrant and the number of shares to which itrelates. Subject to the articles, a share warrant can be surrendered forcancellation. If so, the holder is entitled to be re-entered into theregister of members. Vouchers are usually issued with the share
warrants in order that any dividends may be claimed.
The holder of a share warrant remains a shareholder but whether theyare a member of the company depends on the articles of thecompany. A company which converts all its shares to share warrantsshould be careful: it could become a member less company andtherefore cease to exist.
If a share certificate is lost?
This will be dealt with in the company's articles. For example, a typicalprovision is set out in paragraph 7 of Table A of The Companies(Tables A to F) Regulations 1985 which allows for a replacement sharecertificate to be issued when the directors are assured that the oldcertificate has been lost, worn out, defaced, or destroyed.
The directors will normally require the holder to give up any defacedor worn-out certificate and to sign an indemnity about the use of anylost certificate. They may also require the holder to pay anyreasonable expenses for investigating any evidence of loss.
Cancellation of shares
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The share belongs to the registered holder, not the company. If aperson is eventually declared legally dead, then the share should betransmitted to the beneficiary (or beneficiaries) - see question 11.
If authorized by its articles, a company may retain any dividends thatremain unclaimed after a certain period.
Mortgages and charges
A charge is security for the payment of a debt or other obligation thatdoes not pass 'property' or any right to possession to the person towhom the charge is given.
A mortgage is security for the payment of a debt or other obligationthat passes 'property' but no right to possession to the person towhom the mortgage is given.
Note: When 'charge' is used in this booklet from now on, it refers alsoto a mortgage.
Charges must be registered
Section 396 of the Companies Act lists the charges that must beregistered in England and Wales. The box on the below lists them andgives a brief explanation of each.
Registration costThere is a fee of 10 for registering each Form 395, 397 and 400delivered to Companies House. The fee also applies to Slave burgcharges there is no fee for registering a declaration of satisfaction(Form 403a).
There is a fee of 25 for a copy of a certificate of registration. Theseare available from the Certified Copies Section at Companies House,Cardiff.
The following require registration in England and Wales: A charge to secure any issue of debentures. A debenture is aninstrument issued by a company as evidence of a debt or otherobligation. It includes debenture stock, bonds and any other securitiesof a company, whether or not it forms a charge on the assets of thecompany.
A charge on uncalled share capital of the company. Uncalledshare capital is the balance owing for shares that are issued partlypaid.
A charge created or evidenced by an instrument, which, ifexecuted by an individual, would require registration as a bill ofsale. A bill of sale is an instrument creating or evidencing a charge or
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mortgage over goods, including fixtures and agricultural crops incertain cases, but not ships or aircraft.
A charge on land (wherever situated), or any interest in it, butnot a charge for any rent or other periodical sum arising from land.Technically, land includes property.
A charge on book debts of the company. Book debts are debtsthat in the ordinary course of a company's business are commonlyentered in its books.
A floating charge on the company's undertaking or property. Afloating charge is a charge that does not affect the assets chargeduntil some event crystallizes the charge, fixing it to a certain point intime.
A charge on calls made but not paid. Calls made are demands forpayment of any part of the balance owing in respect of shares which
are issued partly paid. A charge on a ship or aircraft or any share in a ship.
A charge on goodwill, or on a patent, trademark, registered design,copyright or design right or a license under or in respect of any suchright
Form Numbers
The form numbers in this table correspond to the relevant sections ofthe Companies Act 1985. Those for which a registration fee is chargedare marked *.
PurposeFormNumber
Particulars of a mortgage or charge 395*
Particulars for the registration of a charge to secure aseries of debentures
397*
Particulars of an issue of secured debentures in aseries 397a
Certificate of registration in Scotland or NorthernIreland of a charge comprising property situated there
398
Particulars of a charge subject to which property hasbeen acquired
400*
Declaration of satisfaction in full or in part of amortgage or charge
403a
Declaration that part of the property or undertaking
charged:(a) has been released from the charge;
403b
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(b) no longer forms part of the company's property orundertaking
Notice of appointment of receiver or manager 405(1)
Notice of ceasing to act as receiver or manager 405(2)
How do I get it right first time?
Select the correct form to send to the correct registration office,and follow any notes on the form itself. Act as quickly as possible: youhave only 21 days from the date of creation of the charge to registerthe correct details.
Extensions of time to allow for postal delays apply only if a charge iscreated outside the UK over property outside the UK. In that case, the21 days runs from the date when the instrument creating orevidencing the charge, or a copy of it, could have been received in theUK in the normal course of post, assuming it was dispatched with duediligence.
Send the instrument creating or evidencing the charge with theform, if there is an instrument, as there usually will be. An instrumentdoes not have to be sealed. Unsealed, it will be valid if it is signed bya director and the company secretary, or by two directors.
When the application for registration
reaches Companies HouseIf the document is acceptable, we take details from it to produce acertificate of registration and record an entry on the register ofcharges. We return the certificate and instrument to the presenter,and scan and record the form, copy certificate and register entry.
What if the charge is not registered in time?
If a registrable charge is not registered in time, then it is void against
the liquidator or administrator and any creditor of the company. Thismeans that the debt for which the charge was given will remainpayable, but it will be unsecured.
If a company fails to deliver a registrable charge, and no interested partyhas registered it, then the company and every officer of the companywho is in default are liable to a fine. If the default continues, they areliable to a daily default fine
Can a charge be registered out of time? Only the court can grant anextension of time for registration of a charge that was not received in
time and correct. The normal time limit is 21 days from the date ofcreation of the charge.
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Rights of charges
If the company does not send us a charge for registration, then thecharge (the person to whom property is charged) - or some otherinterested person - can register the required documents. In certaincircumstances a charge can appoint a receiver or manager, or ask thecourt to appoint a receiver or manager, over the property charged -for example, if the company defaults in payment of the debt securedby the charge. The charge must notify the appointment to CompaniesHouse within 7 days using Form 405(1). We will then enter this in theregister of charges.
On ceasing to act, a receiver or manager must notify us using Form405(2). We will then enter the fact in the register of charges. See ourbooklet, 'Liquidation and Insolvency', for more information on
receivers and managers.
If a company is oversea
An oversea company is a company incorporated outside Great Britain.Channel Island and Isle of Man companies that send charges forregistration are treated as oversea companies.
If an oversea company has a branch or other place of business inEngland or Wales and is registered at Companies House, it must
register charges created by it. This includes: Charges over property in England and Wales; and
Property in England and Wales acquired by the company that isalready subject to a registrable charge.
COMPARISION OF LAW OFCAPITAL & FINANCING IN
PAKISTAN & U.K
Similarities:
1. The act allows the registrar to prescribe penalties wheredocuments are not field on time both in Pakistan and in UK law.
2. .If the signed accounts are filed after the dead line penalties will
be issued.3. .the memorandum of association must show the names of people
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who have agreed to own shares and number of shares each own.
4. .each share has a specific number.
5. .Notice of increase in authorized capital must reach companieshouse or registrar within 15 days.
6. .The Company can reduce its authorized capital by passing anresolution to cancel shares which have not been taken by any person.
7. The amount of issued capital can not exceed the amount ofauthorized capital.
8. .public companies can issue shares to general public both inPakistan and in UK.
9. .Directors allots the shares with the will of existing sharesholders.
10. .All payment at the time of issue is not necessary. But at least
quarter of nominal value and premium must be paid up.
11. .Premium amount is recorded in the share premium account.
12. Both in Pakistan and in UK four types of shares
a. Ordinary shares
b. Preference shares
c. Cumulative preference shares
d. Redeemable shares
13. .Company can consolidate its share capital into shares of largeramount.
14. .Company can sub divide its share capital.
15. .Class rights may be amended but non redeemable shares cannotbe converted into redeemable shares.
16. The share certificate can be reissued if old one is lost but itdepends on the articles of the company.
17. If a share holder is dead or can not be traced then shares aretransmitted to the beneficiary.
18. .If a company dont send charge for registration to the charge,charge can appoint a receiver or manager or ask the court to appointthe manager.
19. .Debenture holders dont have voting rights. They can vote onlyin the meeting of debenture holders.
20. .New shares are issued to existing share holders in proportion totheir existing shares.
21. .companies can reduce its share capital.
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Differences:
1. In Pakistan all information's are send to the registrar
While in UK all information is send to the company's house.
2. In Pakistan law for making any amendment a general meeting i
