Section 49 of Companies Act. Calls on shares of same class to be made on uniform basis.

“Where any calls for further share capital are made on the shares of a class, such calls shall be made on a uniform basis on all shares falling under that class.

Explanation. — For the purposes of this section, shares of the same nominal value on which different amounts have been paid-up shall not be deemed to fall under the same class.”

Essential Ingredients of Section 49 of Companies Act

Share Capital:

Share capital is the fundamental nature of any firm, representing funding and ownership. It is crucial for investors and businesses to understand the various kinds of share capital and the regulations that govern to them.

Same class of shares:

The shares are said to be of the same class if they fulfil two criteria:

The shares have same nominal value, and
The shares have same paid-up capital.

Uniform Basis:

There has to be a constant push for more share capital of every class of shares. The corporation should not make differences in the class of shares.

Nominal Value:

The minimum value at which a share can be offered in the initial issuance is known as the nominal value of the shares.

Delving into Call on Shares

The company directors are in charge of posting the call notice in compliance with the legal entity’s bylaws. A call on shares is a request made by the directors of the company to the shareholders, informing them that they must pay the company a specific sum of money as was either partially or entirely agreed upon.

If the company believes that it is necessary to settle its liability then the company at any time has the power to ask the shareholders to pay the unpaid money.

The director of the company has the authority to issue call on shares. However, the call on shares should not be made for personal benefit. The call on shares should only be made when there is a legitimate demand to raise the finances of the company.

How Call on shares made?

The call for shares are made by company adhering to two rules: –

The One-fourth (25%) of the share’s nominal value cannot be more than the call on shares.

Unless the company’s articles of association specify otherwise, a minimum of one month must pass between the issuance of two calls.

The Essence of Fairness: A Level Playing Field for Shareholders

The feeling of fairness among the shareholders can only be ensured if share capitals within the same class of shares are made equally and uniformly. This uniformity prevents any sort of discrimination among the shareholders that possess same type of shares.

The explanation of section 49 of the Companies Act, 2013 clearly specifies the condition when the shares will not be regarded under same class. It states that when the shares having the same nominal value gets the different paid-up amount by the shareholders it will not fall under the same class of shares.

Intricacies of Section 49 of Companies Act

Difference between Nominal value and Paid-up capital:

The minimum value at which a share can be offered in the initial issuance is known as the nominal value of the shares. The nominal value is also known as the face value Whereas, the paid-up capital can be referred to as the amount that is actually paid by the shareholders in buying the shares.

Exception to this Section:

If the company during insolvency proceedings creates a differentiation between the value of the same class of shares then it is exempted under the section. However, proper justifications should be made in the proceedings.

Beyond Text: The Ripple Effect of Uniformity

The uniformity maintained by the company has various effect on different stockholders such as: –

Companies:

The uniformity maintained by the company fosters trust with investors and it helps the company to face capitals and avoid being sued.

Investors:

When the share capitals within the same class of shares are made equally and with uniformity, it assures the investors of fair treatment and equal opportunity that will be provided by the company to them.

Regulators:

The regulators are always there to ensure the protection of investors’ interest from the discrimination of the companies. They force the companies to work in compliance with this act.

Amendments of Section 49 of Companies Act

The Companies (Share Capital and Debentures) Amendment Rules, 2018 have been implemented in order to strengthen the smooth functioning and calling of shares. The amendment rules ensures the following things: –

Clarifying Ambiguities:

Previous to the Companies (Share Capital and Debentures) Amendment Rules, 2018 there were many interpretations of Section 49 which created ambiguity. Therefore, interpretation of the section was required to ensure clarity and prevent the exploitation of loopholes. The amendment rules 2018 did the same and brought clarity about the section.

Focus on Transparency:

The process of call on shares are done in transparent manner. Also, the exemptions used by the company during call on shares should be justified. This ensures transparency in the process.

In Conclusion: Building Trust, One Uniform Call at a Time

The principle of uniformity which inserts fairness and transparency in the process of call and shares ensures that both the companies and its investors can have a trust in each other in the investment related to the company.

When the shareholders are on the same page they don’t feel discriminated against and it increases their belief in the company and paves the way for a healthy and sustainable corporate ecosystem.

FAQs

Q1) What is the meaning of uniform basis?

There has to be a constant push for more share capital of every class of shares. The corporation should not make differences in the class of shares.

Q2) What is the meaning of making calls on shares?

A call on shares is a request made by the directors of the company to the shareholders, informing them that they must pay the company a specific sum of money as was either partially or entirely agreed upon.

Q3) How many calls can be made on shares?

One-fourth (25%) of the share’s nominal value cannot be more than the call on shares.

Q4) What are the different types of call on shares?

There are generally three types of calls on shares preferred by the company. They are as follows: –

A proper call letter.
A call receipt.
A call slip.

Q5) In which manner calls on shares should be made by a company?

The call for shares are made by company adhering to two rules: –

The One-fourth (25%) of the share’s nominal value cannot be more than the call on shares.
Unless the company’s articles of association specify otherwise, a minimum of one month must pass between the issuance of two calls.

Q6) What is the amount called on shares by the company but not received?

When even after call on shares by the company the shareholders failed to pay the remaining amount of unpaid share it is termed as Calls- in – Arrears.

Q7) What is first call in shares?

If the shares are allotted to the shareholders even without paying the full amount of the share then the instalments for the payment of these unpaid shares are known as call in shares. The first call share is the first demand made by the company to pay the unpaid money in instalment.

Q8) Why is Call on shares made?

If the company believes that it is necessary to settle its liability then the company at any time has the power to ask the shareholders to pay the unpaid money.

The call on shares should only be made when there is a legitimate demand to raise the finances of the company.

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Section 49 of Companies Act 2013

Aayush Aman

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