Doing Business in India - RSM Austria

paid up equity capital can be less than Rs. 100 million (about US$ 2.22 million), if the
market capitalization of the applicant’s equity is not less than Rs. 1 billion (about US$
22.23 million). However, in any case the paid up equity capital of the company shall
not be less than Rs. 50 million (about US$ 1.11 million). A public limited company
cannot make any allotment of shares unless a minimum subscription of 90% of the
issue amount has been subscribed. For continuation of listing all listed companies
should have non-promoter holding to the extent of 10% of the post issue capital (for
an existing company which had in the past offered shares to the extent of 10%
pursuant to the relevant regulations) or 25% for a new company.
2.3 Kinds of Shares
A public limited company is allowed to have only two classes of share capital viz.
equity and preference shares.
2.3.1 Equity shares are further divided into shares with
i. voting rights
ii. with different rights as to dividend, voting or otherwise as per the rules
prescribed.
As per the Companies (Issue of Share Capital with Differential Voting Rights) Rules,
2001, only such companies fulfilling certain basic criteria are allowed to issue shares
with differential voting rights viz., three year track record of distributable profits,
non default inter alia in respect of filing of accounts, annual returns, repayment of
deposits, redemption of debentures, payment of dividend. Approval of the
shareholders for issuing such shares should be obtained at a General Body Meeting
of the shareholders and in case of listed companies through system of postal ballot.
Such shares, however, can be issued to the extent of 25% of the company’s total
issued share capital only. So far as private limited company is concerned, there is no
restriction on issue of shares of only two kinds as mentioned above and also there is
no restriction of issue of shares with disproportionate rights.
2.3.2 Preference shares, which carry a pre-determined coupon rate for payment of
dividend each year can be of different types i.e. Cumulative, Non-cumulative,
Convertible and Non-convertible. Only redeemable preference shares can be issued
and the maximum period within which shares should be redeemed should not
exceed twenty years. Preference shareholders have voting rights only under certain
given conditions like non-payment of dividends:
i. in case of cumulative Preference shares, for an aggregate period of not
less than two years and
ii. in case of non-cumulative Preference shares, either for a period of two
years immediately preceding the commencement of meeting of the
shareholders or for an aggregate period of not less than three years.
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DOING BUSINESS IN INDIA