Hye Folks,
I have a solid confusion in respect of
‘Provision of Qualification Shares to Directors’ and
‘Mandatory subscripttion of at least one share in Public Company’
I am giving below the procedure which I HAVE UNDERSTOOD in respect of formation of company (obviously, focus would be on aforesaid provisions). I KINDLY want other members to comment whether I am right or wrong ….
Lets assume that there is public company to be formed with a capital of Rs. 5,00,000/- and face value of share is Rs. 10/- and provision of 100 shares qualification is there in AoA for Directors …
1) 7 subscribers take shares (say 7 shares they have taken). Hence balance 49,993 shares are remaining.
2) Now, subscribers have provided in AoA that 3 persons, say Mr. A, Mrs. B and Mr. C, shall be the first directors.
3) Now, as provision of share qualification, that 3 first directors shall require to take 100 each i.e. 300 shares.
4) Due to this, members of company will now become 10 and balance shares remaining will be 49,693.
5) Such balance shares will be issued to public later on. For this company has to issue prospectus having necessary details.
6) Such first directors shall hold office upto first GM. In that GM, they may be re-appointed or may not be.
7) Suppose, they have not been re-appointed. In this case, they will cease to be a director only and they will continue to be a member.
8) Directors appointed in place of retiring directors shall require to take qualification shares either from open market or some existing members may transfer shares to them.
Please comment whether I have written is right or wrong.
CAclubindia
