Qualification Shares

This query is : Resolved

Muralidharan (Querist)
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07 June 2010 XYZ Private Limited had approached TIIC (a govt of tamilnadu financial institution) for term loan and same has been sanctioned.

One of the condition imposed by TIIC is the Articles of Association has to be amended in such a manner that the "Directors of the company should hold Qualification Shares".

There are three directors in the company
(1) Promoter Director is holding substantial holding in the company
(2) Other two directors are already holding 100 shares each.

My query is as follows:

Can we amend the articles for the directors to hold qualification shares of not less than Rs.1000/- (100 shares of Rs.10/- each)

Is it enough if they hold 100 shares of Rs.10/- each or Should they hold 500 shares of Rs.10/- each aggregating to Rs.5000/- (Section 270 prescribes Rs.5000/- as qualification shares)

Please clarify

Muralidharan

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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07 June 2010 YES IT IS ENOUGH IF THEY HOLD 100 SHARES OF RS 10 EACH. BUT THEY SHOULD ACQUIRE IT WITHIN 2 MONTHS AFTER HIS APPOINTMENT AS DIRECTOR.

270. TIME WITHIN WHICH SHARE QUALIFICATION IS TO BE OBTAINED AND MAXIMUM AMOUNT THEREOF.
(1) Without prejudice to the restrictions imposed by section 266, it shall be the duty of every director who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect, to obtain his qualification within two months after his appointment as director.

(2) Any provision in the articles of the company (whether made before or after the commencement of this Act) shall be void in so far as it requires a person to hold the qualification shares before his appointment as a director or to obtain them within a shorter time than two months after his appointment as such.

(3) The nominal value of the qualification shares shall not exceed five thousand rupees, or the nominal value of one share where it exceeds five thousand rupees.

(4) For the purpose of any provision in the articles requiring director to hold a specified share qualification, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant.

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