Issue of Shares


In a private limited company, there were 2 shareholders A(60%) and B(40%). The shareholder A was not represented in the board of directors. Only 2 directors were there in the board and they were representing shareholder B. They issued shares such that the new shareholding pattern changed to A-30% and B-70%. Can this be challenged ?

 
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Advocate

Yes provided the shareholders are also the promoters and the Shareholder A has not executed any blank share transfer form(which can be misused by B).


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Thank you for your reply.

To add on,

Shareholder - A is not a promotor

Shareholder A has not executed any blank share transfer form

Also, at the time of issue of new shares to B, some amount was already collected from A as earnest money for issue of shares.

The shares were issued at a nominal amount of Rs 10/- when the cash balance and assets of the company are valued at a higher price around Rs 100/- per share.

Can this be taken up as 'Serious Fraud' case ?

 

 
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Company Secretary

The issue of further shares has nothing to do with the valuation of the Company. It may be at par, at premium or at discount, as per the descretion of the Board. Hence, its a foolproof "no fraud" allotment.

Secondly, Section 81 is not applicable to pvt. company. You need to check the provisions of the Articles of the Company.

In case, it adhers to Section 81 (or any other such clause), then the shares must be offered to A too.

In case no, then, it is solely at the discretion of the Board whom to allot shares, as it is a private company.

 
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B.com

Yes this is not valid. the shares can be issued in the equal proportion and the right of other member(S/H) can not be suppressed.

pl. consult a Company Secretary

 
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B.com

i did not understand ur view.

 
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