Current changes in syllabus class 12

Hi students there are current changes in  debentures & shares :

Requirements of creation of debenture redemption reserve under companies Act 2013

Category of companies	Amount of debenture redemption reserve to be maintained
All India financial institutions regulated by RBI & banking companies.	No DRR is required for both public as well as privately placed debentures.
Other financial institutions within the meaning of section 4A.	25 % of the value of debenture issued through public issue. No DRR is required for privately placed debentures.
Non banking financial companies (NBFC) registered with RBI under section 45-IA of the RBI(Amendment ) Act 1997	25 % of the value of debenture issued through public issue. No DRR is required for privately placed debentures.
Other companies including manufacturing & infrastructure companies .	25 % of the value of debenture issued through public issue. 25 % of the value of debenture issued through private placement by listed and unlisted companies.

Rules regarding debenture redemption fund investment :

In addition to imposing the condition of creation of a DRR by every company for every issue of debentures; whether public or privately placed, the Circular 2013 further requires every such company to park, on or before 30^th day of April each year, a sum of at least 15% of the amount of its debentures, maturing during the year ending on the 31^st day of March next following, in any one or more of the following methods:

1. in deposits with any scheduled bank, free from charge or lien;
2. in unencumbered securities of the Central Government or of any state government;
3. in unencumbered securities mentioned in clauses (a) to (d) & (ee) of Section 20 of the Indian Trusts Act, 1882;
4. in unencumbered bonds issued by any other company which is notified under clause (f) of Section 20 of the Indian Trusts Act, 1882.

The money so parked can be utilized only for the purpose of repayment of debentures maturing during the year. The amount remaining deposited/ invested shall not at any time fall below 15% of the amount of debentures maturing during that year ending 31^stMarch.

The unclear language of Circular 2013 mandates not only every company; whether listed or unlisted, private or public, to create a DRR for their issues; whether public or private, listed or unlisted, it also imposes a stringent condition of parking a sum equal to 15% of the value of debentures maturing during the year separately in the beginning of the year itself.

Important of financial statement analysis:

1.       Holding Of Share
Shareholders are the owners of the company. Time and again, they may have to take decisions whether they have to continue with the holdings of the company's share or sell them out. The financial statement analysis is important as it provides meaningful information to the shareholders in taking such decisions.
2. Decisions and Plans
The management of the company is responsible for taking decisions and formulating plans and policies for the future. They, therefore, always need to evaluate its performance and effectiveness of their action to realise the company's goal in the past. For that purpose, financial statement analysis is important to the company's management.
3. Extension of Credit
The creditors are the providers of loan capital to the company. Therefore they may have to take decisions as to whether they have to extend their loans to the company and demand for higher interest rates. The financial statement analysis provides important information to them for their purpose.

4. Investment Decision
The prospective investors are those who have surplus capital to invest in some profitable opportunities. Therefore, they often have to decide whether to invest their capital in the company's share. The financial statement analysis is important to them because they can obtain useful information for their investment decision making purpose.

Meaning of share:

 Section 2(84) of the Companies Act, 2013 (hereinafter referred to as Act) “share” means a share in the share capital of a company and includes stock. It represents the interest of a shareholder in the company, measured for the purposes of liability and dividend. It attaches various rights and liabilities.

 Categories of Share Capital

 Share capital of the company can also be sub divided into following categories-

Authorized Capital– As per section 2(8) of Companies Act, 2013 “authorized capital” or “nominal capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company;
Means Authorized or Nominal Capital is that amount of Capital upto which Company can issue its capital.

Issued Capital– As per section 2(50) of the Companies Act,2013″issued capital” means such capital as the company issues from time to time for subscription;
In simple words issued capital is that part of capital which have been issued for subscription.

Subscribed Capital- Section 2(86) of the Companies Act,2013 defines Subscribed Capital as such part of capital which is for the time being subscribed by the members of the Company. Means it is that part of issued capital which has been subscribed.

Paid up Capital– Section 2(64) of the Companies Act, 2013 provides “paid-up share capital” or “share capital paid-up” means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called;

Definition of Company:

Section 2(20) of the 2013 Act defines the term “company” to mean “a company incorporated under the Companies Act 2013 or any previous company law.” Accordingly, a company, which is incorporated under the relevant legislation of a foreign country, will not qualify as a “company” under the 2013 Act The proviso to section 2(71) states that “a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act.”

Definition of Private Company:

Section 2(87) defines the terms “subsidiary” in relation to any other company. The sub-section states that for the purposes of such definition, the expression company includes “body corporate”

Definition of company limited by shares:

As per section 2(22) of companies Act 2013  “company limited by shares” means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them;

Definition of company limited by guarantee:

As per section 2(21) of companies Act 2013 “company limited by guarantee” means a company having the liability of its

members limited by the memorandum to such amount as the members may respectively

undertake to contribute to the assets of the company in the event of its being wound

up;

Definition of unlimited liability company:

As per section 2(92) of companies Act 2013 “unlimited company” means a company not having any limit on the liability

of its members;

Types  of share capital :

Equity Share Capital Section 43 of the Act provides that the share capital of a company limited by shares shall be of two kinds:

(a)    equity share capital— (i) with voting rights; or SHARE CAPITAL AND DEBENTURES 1 2 Share Capital and Debentures (ii) with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed; and (b) preference share capital: ‘‘Equity share capital’’,

(b)   With reference to any company limited by shares, means all share capital which is not preference share capital. As per section 43 (a) equity share capital may be divided on the basis of voting rights and differential rights(DVR) as to dividend, voting rights or otherwise according to the rules

Preference Share Capital:  The other type of share capital is the “Preference share capital”. According to section 55 of the Act, a company limited by shares cannot issue any preference shares which are irredeemable. However a company limited by shares may, if so authorized by its articles, issue preference shares which are liable to be redeemed within a period not exceeding twenty years from the date of their issue.

Section 52 (2) of companies Act 2013 Application of premiums received on issue of shares:

1. Transfer a sum equal to the aggregate premium amount as received to "securities premium account"; 2. The provisions relating to reduction of share capital of a company (under companies act) shall be applicable as if the securities premium account was the paid-up share capital of the company;

3. The company may use the securities premium account for the following purposes.

Bonus shares: Paying up unissued equity shares of the company to be issued to members of the company as fully paid bonus shares; or

Writing off: Writing off expenses / commission paid / discount allowed on any issue of equity share capital or Writing off the preliminary expenses of the company.

Providing for the premium payable on the redemption of any redeemable preference shares or of any debentures of the company;

Buy-back: Purchasing its own shares / other securities (under section 68).

Section 53 of companies Act 2013 issue of shares at discount:

Prohibition on issue of shares at discount.

1.     Except as provided in section 54, a company shall not issue shares at a discount.

2.     Any share issued by a company at a discounted price shall be void.

3.     Where a company contravenes the provisions of this section, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees, or with both.

Minimum Subscription:

The Securities and Exchange Board of India (Sebi) has prescribed a minimum subscription requirement for public issues of debt securities of 75 per cent of the offer, below which no allotment of debt securities should be made.

The issuer of equity share capital is at present required to make a declaration about the refund of the issue, if the minimum subscription of 90 per cent of the issue size is not received. However, for public issue of non-convertible debentures (NCDs), no such requirement is specified under Companies Act, 1956.

Further, existing SEBI ILDS Regulations (Regulation 12 of SEBI Issue and Listing of Debt Securities Regulations, 2008), allows the issuer to decide the amount of minimum subscription, which it seeks to raise from public through issue of NCDs and disclose the same in the offer document.

Companies Act, 2013 and (draft) Rules made under it also do not specify the quantum of minimum subscription needed in case of public issues (both for equity and debt), but only requires disclosure of the same in the offer document.