Chapter No.

5
Sunday, August 6, 2023 1:40 PM
Section 58,60,61 and 62 It is very IMPORTANT. It means that partly paid shares are not allowed.
Saturday, August 5, 2023 10:30 AM
The concept of partly paid exist in Companies Act, 1913 but it was deleted in
Companies Ordinance, 1984.

58. Classes and kinds of share capital.—

A company having share capital shall issue only fully paid shares which may be of different kinds and classes as provided by its
memorandum and articles:
Provided that different rights and privileges in relation to the different kinds and classes of shares may only be conferred in such
manner as may be specified.
 < The section is talking about physical shares >
60. Numbering of shares.— < Each share certificate shall be unique from another one in respect of unique number >

Every share in a company having a share capital shall be distinguished by its distinctive number:
Provided that nothing in this section shall apply to a share held by a person whose name is entered as holder of beneficial interest
in such share in the records of a central depository system.

Reason = Where any share certificate is lost, it is addressed by its distinctive number. If no distinctive number, then how to
address a specific share certificate which is lost.

This section does not apply to shares that are held in book entry form.
In book entry form, the holder is Central Depository Company but the beneficial interest (Owner) is respective "Shareholder"

61. Nature of shares or other securities.—

The shares or other securities of any member in a company shall be movable property transferable in the manner provided by the
articles of the company.

62. Shares certificate to be evidence.—

< Other than Listed Companies >
(1) A certificate, if issued in physical form under signature of authorized officer of the company as may be specified or issued in
book-entry form, specifying the shares held by any person or shares held in central depository system shall be prima facie evidence of
< Central Depository Company > < On the face >
the title of the person to such shares.
The law is overriding Articles of Company
(2) Notwithstanding anything contained in the articles of a company, the manner of issue of a certificate of shares, the form of such
certificate and other matters shall be such as may be specified.

< Practical Examples of Share Certificates >

Section 25
Thursday, August 3, 2023 10:41 PM

Publication of authorised as well as paid-up capital

(1) Where any notice, advertisement or other official publication of a company contains a statement of amount of authorised capital
of the company, such notice, advertisement or other official publication shall also contain a statement in an equally prominent
position and in equally conspicuous characters of amount of the paid up capital.

Authorised Capital (100,000,000 Shares of Rs. 10 each) 1,000,000,000/-

• Issued, Subscribed and Paid-Up Capital (100,000 Shares of Rs. 10 each) 1,000,000/-

(2) Any company which makes default in complying with the requirements of sub-section (1) and every officer of the company who is
party to the default shall be liable to a penalty not exceeding of level 1 on the standard scale.
Alteration of Articles - Section 38 and 59
Friday, August 4, 2023 5:40 PM

Alteration of articles

(1) Subject to the provisions of this Act and to the conditions contained in its memorandum, a company may, by special
resolution, alter its articles and any alteration so made shall be as valid as if originally contained in the articles and be subject in
like manner to alteration by special resolution:
Provided that, where such alteration affects the substantive rights or liabilities of members or of a class of members, it shall be
carried out only if a majority of at least three-fourths of the members or of the class of members affected by such alteration, as
the case may be, exercise the option through vote personally or through proxy vote for such alteration.

(2) A copy of the articles of association as altered shall, within thirty days from the date of passing of the resolution, be filed by the
company with the registrar and he shall register the same and thenceforth the articles so filed shall be the articles of the company.

Section 59 of Companies Act, 2017

(1) The variation of the right of shareholders of any class shall be effected only in the manner laid down in section 38.

(2) Not less than ten percent of the class of shareholders who are aggrieved by the variation of their rights under sub-section (1) may,
within thirty days of the date of the resolution varying their rights, apply to the Court for an order cancelling the resolution:
Provided that the Court shall not pass such an order unless it is shown to its satisfaction that some facts which would have had a
bearing on the decision of the shareholders were withheld by the company in getting the aforesaid resolution passed or, having regard
to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by the
applicant.

(3) An application under sub-section (2) may be made on behalf of the shareholders entitled to make it by such one or more of their
number as they may authorise in writing in this behalf.

(4) The company shall, within fifteen days of the service on the company of any order made on any such application, forward a copy of
the order to the registrar and, if default is made in complying with this provision, the person making the default shall be guilty of an
offence under this section and be liable to a penalty not exceeding of level 1 on the standard scale.

(5) The expression “Variation” under this section includes abrogation, revocation or enhancement.

Abrogation Reducing
Revocation Cancellation
Enhancement Increasing
 Class whose rights are
changed unfavourably
are called as
Aggrieved Class.

These may apply to

the court for
cancellation of
resolution.

Class Resolution shall be passed by those

whose rights are got affected. It may be Shall be passed by majority of at-least 3/4th of them

favourable changes in rights or unfavourable

changes in rights. But in both cases, resolution
shall be passed by them.
Practice Questions - 1
Sunday, August 6, 2023 1:46 PM
Section 85
Saturday, August 5, 2023 11:33 AM

(1) A company having share capital may, if so authorised by its articles, alter the conditions of its memorandum through a special
resolution, so as to- Generally, this clause exist in Articles of Association.
If this is not exist then, first we amend our articles and then amend our
memorandum

Format of Memorandum of
Association
Memorandum of Association:
- Authorized Share Capital xxxx
Ordinary Shares
Class A xxxx
Class B xxxx
Preference Shares
Class A xxxx
Class B xxxx

(a) increase its authorised capital by such amount as it thinks expedient;

< If company want to increase its Paid-Up Capital in future >

(b) consolidate and divide the whole or any part of its share capital into shares of larger amount than its existing shares;
(c) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum:
(d) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken
by any person, and diminish the amount of its share capital by the amount of the share so cancelled:

For Example :
If authorized capital of the company is 10,000 Shares of Rs. 10 each 100,000
Issued, Subscribed and Paid-Up Capital (5,000 Shares of Rs. 10 each) 50,000
A company may by passing special resolution cancel its share capital by 50,000 (i.e. share not taken up)

Provided that, in the event of consolidation or sub-division of shares, the rights attaching to the new shares shall be
strictly proportional to the rights attached to the previous shares so consolidated or sub-divided:
Provided further that, where any shares issued are of a class which is the same as that of shares previously issued, the
rights attaching to the new shares shall be the same as those attached to the shares previously held.

For Example: If a company has authorized capital of Rs. 100,000 (10,000 Shares of Rs. 10 each) and all
its shares are subscribed and it wants to issue further share capital and wants to issue the same class as
previously held then rights of new shares to be issued shall be same as previous one.

Effect of rights of share holders:

In case of consolidation or subdivision of shares, rights shall be strictly proportional to previous shares. This means that if
class A of ordinary shareholders, having a right of 2 votes in general meeting, then:
A) In case of Consolidation of 2 shares into one, shareholder have the right of 4 votes.
B) In case of sub-division of a share into 2 shares, shareholder have the right of 1 vote.

(2) The new shares issued by a company shall rank pari passu with the existing shares of the class to which the new shares belong in all
It means "Equal"
matters, including the right to such bonus or right issue and dividend as may be declared by the company subsequent to the date of
issue of such new shares.
Extracts of Company ABC Limited which has following proposals:

Name = ABC Limited

Status = Public Unlisted Company
Nature = Textile Company

Existing Authorized Capital of ABC Limited = 10,000 Ordinary Shares of Rupees 10/each ==> Rupees 100,000/=

Authorized Share Capital: 100,000

Ordinary Shares (10,000*10) 100,000

(a) Increase in Authorized Capital:

Reason for this and its impact on financial statements:
1) There may be the reason that ABC Limited is in need of money and it may do so by further issue of share capital.
A) It may do so by introducing a new kind of share capital.
B) It may do so by introducing a new class of existing share capital.
C) It may do so simply by increasing a amount of its existing share capital by increasing no. of shares.

Pari passu means "EQUAL". A)

Authorized Share Capital: 300,000
In case (c), new authorized
share capital shall have equal Ordinary Shares 100,000
Preference Shares 200,000
right. Right shall be same as
rights of existing ordinary
shares. There will be no B)
Authorized Share Capital: 300,000 3 Possible Scenarios
change in their right. (Bonus,
Ordinary Shares 300,000
Dividend etc). All have same Class A 100,000
Class B 200,000
rights.
C)
Authorized Share Capital: 300,000
Ordinary Shares(30,000*10) 300,000

(b) Consolidation of Face Value:

Reason for this and its impact on financial statements:
1) There may be the reason that the company want to show better results to its share holders and considering this
point of view, it may consolidate the face value of its shares. As a result of this, no. of shares will be reduced as
now one share will have more par value than previous value. As soon as number of shares will get decreased,
Earnings per share will get improved as the denominator ( i.e. number of shares ) have decreased.

Example
Authorized Share Capital: 100,000
Ordinary Shares (5,000*20) 100,000

Previously, there were 10,000 shares. After consolidation of face value. Only 5,000 shares are there.
 (c) Sub-Division of Face Value:
Reason for this and its impact on financial statements:
1) For Decrease in EPS: In this case, the impact will be opposite as it was for consolidation. In this case, EPS of the
company will get reduced as denominator will get increased after proposed sub-division of face value.
2) For Easy Accessibility of Shares: Another possible reason for sub-division of shares is for easy accessibility of
shares. (For example. Share having face value of Rs. 10/share will be less traded as compared to share having
face value of Rs. 5/share)

Example
Authorized Share Capital: 100,000
Ordinary Shares (20,000*5) 100,000

(d) Cancellation of shares not subscribed:

Reason for this and its impact on financial statements:
1) There may be the reason that the company want to wipe off the power to raise further capital in the company.

Example

Authorized Share Capital: 80,000

Ordinary Shares (80,000*10) 80,000

Let say that in this case, issued, subscribed and paid-up capital of the company was 80,000/=. Authorized Capital was 100,000/=
as mentioned above of ABC Limited. 20,000/= represents margin in authorized share capital and it can be used for further issue
of shares in future. Company alters share capital and wiped it off.

Practical Example in relation to this.

1. Notice of General Meeting

2. Certified True of Resolution Passed in General Meeting
Practice Questions - 2
Sunday, August 6, 2023 1:49 PM
MCQ's
Sunday, August 6, 2023 1:50 PM
Past Papers
Sunday, August 6, 2023 1:59 PM

September 2022

March 2022
September 2021

Q no 8
 March 2021

September 2018

Q no 6
Q no 6