The liability of a shareholder to pay the full value of the shares held by him is enforced by making ‘calls’ for payment. A ‘call’ is a demand by the company on its shareholder to pay whole or part of the balance remaining due and unpaid on each share made at any time during the continuance of the company.
Company can require full payment of each share or require the shareholder to pay the amount in some installment. For example, a share valuing 100 taka may be paid in the following way—
On application – Tk 10
On allotment – Tk 40
On first call – Tk 25
On second call – Tk 15
On final call – Tk 10
Here except the amount paid on allotment and application and allotment (10+40) = 50, rest of the amount may be paid by three installments. These three installments are called share calls.
Requisites of valid call:
- A call must be made under a resolution of Board of Directors duly appointed and qualified and meeting being duly convened and resolution, being duly passed in the presence of proper quorum.
- The resolution must state the amount of the call and time in which it is to be paid. Otherwise the call is valid.
- A call must be made bona fide only in the interest of the company and not otherwise.
- Call shall be made on a uniform basis on all shareholders falling under the same class.
- At least 21 days’ notice must be served to pay the called money.
- Company can claim interest in case of delay in payment and can forfeit the share in case of non- payment.
- No call shall be for an amount exceeding one fourth of the face value of the share.
- At least one month shall be maintained between two consecutive share calls.
Share Calls in Advance:
The company can receive any kind of unpaid amount or part from the shareholder in advance though no call is yet made, if permitted by the article of the company. This is called share calls in advance. The shareholder will be entitled to an interest not exceeding 6% until the amount becomes due.
Share Calls in Arrear:
If the shareholder fails to pay the call money the amount which remains arrear may be called later if permitted by article. Such share is known as Share call in arrear. For example, A company calls for 2000 shares 3 Tk each. 100 shares are not paid. So (100×3) = 3000 Tk is share calls in arrear.
Company can claim 5% interest on arrears until it is duly paid.
Forfeiture of Share:
If a member, having been called upon to pay, defaults the company may, bring an action and if article permits can forfeit such shares. Forfeited shares become the property of the company and can be re-issued on new terms.
Rules regarding valid forfeiture:
- Forfeiture can be made only on the grounds specified in the article.
- A 15 days’ notice under the authority of Board of Directors must be served on the shareholder in default.
- The notice of forfeiture does not operate by itself. The directors must pass a resolution to declare the forfeiture operative.
- The power of forfeiture must be exercised in good faith for the benefit of the company, not at the request of the shareholder to relieve him.
- If the forfeited shares are re-issued the new allotee will not be liable for the payment of previous calls.
If the shareholder, of his own, surrenders his shares to the company, then it is known as Share surrender. There is no reference regarding share surrender in the Companies Act but the court has admitted this in several cases.
Rules regarding share surrender:
- It must by supported by article of association
- There must be a valid call by the company to pay some amount of share
- The shareholder must be in default in payment
- Company can accept forfeiture in order to avoid formalities of forfeiture
- The shareholder must be really unable to retain the shares and pay future calls
- The shares can be re-issued on new terms
- The shareholder can surrender his shares to receive the shares of same value as fully paid shares.
- No formalities are to be maintained by the company in case of share surrender.
Lien on Share:
Lien means the right to retain the property of debtor unless and until the debt is satisfied. If permitted by article the company can deny the shareholders right to transfer his shares unless his dues are paid. This is known as lien on share.
Rules regarding Lien:
- It must be permitted by article
- The shares must be partly paid
- Right of lien cannot be exercised if the shares are already mortgaged and company is aware of the fact.
- In order to realize the dues, the company can sell the shares under lien and the transferee gets good title.
Section 158 of the Companies Act 1994 provides that every company shall within 90 days of allotment or registration of any transfer of share prepare ad keep ready for delivery a certificate with the company’s seal. Such certificates are called share certificate.
Legal Effects of Share Certificate:
- The company is liable to keep the certificate ready, not to deliver
- Company cannot deny the authenticity of the share certificate
- Company cannot deny the amount stated in the certificate
- Company is not liable for a forged certificate
- It is an evidence of ownership, therefore, with the transfer of share the the certificate also is changed.
Section 46 provides that a company, if authorized by article, can issue share warrant in favour of the holder or bearer with the interest specified in the instrument. The shares which are fully paid can be transferred into share warrant.
Legal effects of Share Warrant:
- Share warrant is a negotiable instrument and for this it is easily transferable,
- Title of share warrant passes to the transferee with manual delivery only
- As soon as the share warrant is issued, share holder’s name in removed from the member’s list
- Holder of share warrant has no voting right.
- Holder is entitled to dividend by submission of a coupon attached with the share warrant
- The holder can, by surrendering the warrant for cancellation, re-issue the share certificate and enter his name into the members’ list.
According to section 30 (1), share is a movable property and therefore, it is easily transferable subject to the provisions of article. The transfer of a shareholder’s interest in a company is called share transfer.
Procedure of share transfer:
- Either the transferor or transferee shall submit an application to the company regarding transfer of share. (Section 38) Application form is prescribed in the article; otherwise it can be taken from Table ‘A’, Regulation 19.
- With the application the following documents must be submitted—
- Transfer deed signed by both parties
- Share certificate or the letter of allotment
- The company, if the shares are not fully paid, give a notice to the transferee, regarding the dues of the shares he is taking, and if, within two weeks receives no objection from the transferee, shall enter his name into the Register of members.
- Every transfer of share must be registered according to section 38 of the Companies Act. The Company has the power to refuse registration on logical ground.
- After registration, the name of the transferor shall be removed from the members’ list and the name of the transferee shall be added. Otherwise the transferor shall remain liable for future calls.
- A new share certificate shall be issued in the name of the transferee.
In this way, the total procedure of share transfer is complete.