Qualification shares

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chirag goel (Querist)
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14 December 2013 if a company make reduction of capital and due to this the nominal value reduces to 4000 from 5000 then what is the effect on qualification shares of director will he have to vacate his office

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 December 2013 it would be advisable to also amend the provisions providing for the qualification shares simultaneously.

otherwise yes, it would result in disqualification of the director.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 December 2013 refer: http://elearning.icsi.edu/candidate/pdf/Executive/Executive%20%20Short%20Notes_PDF/Group%20II/Company%20Law/GOLS_STUDY_7_ALTERATION_OF_CAPITAL.pdf

chirag goel

chirag goel (Querist)
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14 December 2013 but according to section 270 of the companies act the maximum nominal value can be Rs. 5000. so how can we say that the director should vacate the office.and is this possible that the director can hold the shares for the nominal value greater than Rs. 5000

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 December 2013 you are on the other side of the transaction. if he holds more, there is no issue since there is no limit on holding the shares. the limit is only on the no of shares prescribed as qualification shares.

So as long as you are holding shares equivalent or more than the qualification shares, there is no disqualification.

My earlier comment was on the issue that the reduction in capital should not be done in the manner where director's holding falls below the qualification shares requirements.

chirag goel

chirag goel (Querist)
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14 December 2013 thanks sir but my first part still in the query i.e according to companies act the max nominal value of shares the director can hold is Rs 5000 than how we can say that he should vacate his office if the value reduces to 4000 due to share reduction

Nikhil Kaushik

Nikhil Kaushik (Expert)
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14 December 2013 that is what I answered that while reducing share capital you should amend the relevant clauses of the MOA for qualification shares to 4000.

remember that qualification shares is not a compulsory requirement. If you reduce qualification to 1 share, even that is ok.

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