07 December 2013
if the company provides for reserve capital:-
1) what would fully paid-up share mean??
2)when would the shares be considered fully paid-up, so as to be eligible to be converted into stock??
01 August 2024
Under the Companies Act, 1956, the concepts of fully paid-up shares and their conversion into stock are defined as follows:
### 1. **Fully Paid-Up Share:**
A fully paid-up share refers to a share for which the entire nominal value has been paid by the shareholder. This means that the shareholder has paid the full amount of the share capital as required by the company, including any premium, if applicable.
**Key Points:** - **Nominal Value Paid:** The shareholder must pay the entire nominal value of the share (e.g., ₹10 per share) plus any premium (e.g., ₹5 premium) if applicable. - **No Further Liability:** Once a share is fully paid-up, the shareholder has no further liability towards the company concerning that share.
### 2. **Conversion into Stock:**
For shares to be converted into stock under the Companies Act, 1956, they must be fully paid-up.
**Definition and Process:** - **Stock:** Stock represents a portion of the capital of the company and is a way of organizing shares to allow flexibility in trading. Stock is not divided into shares of fixed amounts but into units that can be of any denomination. - **Conversion Conditions:** - **Fully Paid-Up:** The shares must be fully paid-up, meaning all calls on the shares have been paid and no further payment is required. - **Resolution and Approval:** The conversion of shares into stock typically requires a resolution passed by the company’s board or shareholders, as per the company's articles of association.
**Procedure for Conversion:** 1. **Pass a Resolution:** The company must pass a resolution to convert shares into stock. This resolution should be passed by the shareholders in a general meeting. 2. **Adjust Share Capital:** The nominal value of the shares being converted will be adjusted to reflect the new form of capital. 3. **Update Records:** The company must update its share register and other statutory records to reflect the conversion.
**Legal References:** - **Section 83 of the Companies Act, 1956:** This section covers the conversion of shares into stock and details the conditions under which shares can be converted. - **Section 84 of the Companies Act, 1956:** This section deals with the procedure for conversion and the effects of such conversion.
**Example:** If a company has issued shares with a nominal value of ₹10 each, and these shares are fully paid-up, the company can pass a resolution to convert these shares into stock. The converted stock will not have a nominal value but will represent a proportionate part of the company’s capital.
**In Summary:** - **Fully Paid-Up Shares:** The entire amount payable on the shares must be paid. - **Conversion to Stock:** Requires the shares to be fully paid-up and involves passing a resolution and adjusting records accordingly.
If you have specific details or need further assistance on any related matters, feel free to ask!
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