KUMI UNIVERSITY (TROPIX)

NAME : NAIGAGA ZAKIA AND ANAWOMI AWORI

COURSE : BBA

COURSE UNIT : COMPANY LAW

YEAR : ONE

SEMESTER : TWO
LECTURER : MR. OTIENO GORDON
QUESTIONS
Explicitly carryout research on the following,

i. Meaning and types of share capital

ii. Classes of share capital
iii. Variation of class rights
iv. Alteration of share capital
v. Reduction of capital
vi. Maintenance of capital
vii. Raising share capital
viii. Ways of raising capital
ix. Principles of disclosure and the prospectus
x. The prospectus nature
xi. Liability in respect of prospectus
xii. Allotment of shares
xiii. Nature of allotment of shares
i. Meaning and types of share capital:

Share capital is the total value of shares issued by a company. It represents the owners' equity in

the company and is used to finance its operations. There are two main types of share capital:

 Equity Share Capital: This type of capital represents ownership in the company and

provides shareholders with voting rights and a share in the company's profits in the form

of dividends.

 Preference Share Capital: Preference shares are a type of share capital that gives

shareholders certain rights over common shareholders, such as priority dividend

payments and preference in case of liquidation.

ii. Classes of share capital:

Classes of share capital refer to different categories of shares that a company may issue.

Common classes include:

 Ordinary Shares: These are the most common type of shares, carrying voting rights and

entitlement to dividends after preference shareholders.

 Preference Shares: These shares carry preferential rights, such as fixed dividends, but

may not have voting rights.

 Redeemable Shares: Shares that can be repurchased by the company at a predetermined

price after a certain period.

iii. Variation of class rights:

This refers to the process by which a company can change the rights attached to a particular class

of shares. Such variations typically require approval from shareholders of the affected class,

often through a special resolution passed at a general meeting.

iv. Alteration of share capital:

Alteration of share capital involves changing the structure of a company's share capital, such as

increasing or decreasing the authorized share capital, consolidating shares, or subdividing shares.

This process often requires shareholder approval and compliance with relevant legal and

regulatory requirements.

v. Reduction of capital:

Reduction of capital refers to the process of decreasing a company's share capital, typically to

eliminate accumulated losses, restructure the capital base, or return excess capital to

shareholders. This can be achieved through various methods, such as cancelling shares, reducing

the nominal value of shares, or repurchasing shares.

vi. Maintenance of capital:

Maintenance of capital refers to the legal requirement for companies to preserve their share

capital and not return it to shareholders except in certain circumstances, such as a reduction of

capital approved by the court. This principle aims to protect creditors and maintain the financial

integrity of the company.

vii. Raising share capital:

Raising share capital involves issuing new shares to investors to raise funds for the company.

This can be done through public offerings, private placements, rights issues, or bonus issues,

depending on the company's financing needs and regulatory requirements.

viii. Ways of raising capital:

Companies can raise capital through various means, including:

 Equity Financing: Issuing new shares to investors.

 Debt Financing: Borrowing funds through loans, bonds, or other debt instruments.

 Hybrid Financing: Utilizing instruments that combine features of both equity and debt,

such as convertible bonds or preference shares.

 Internal Financing: Retaining earnings and reinvesting them in the business.

ix. Principles of disclosure and the prospectus:

Principles of disclosure refer to the requirement for companies to provide accurate and

comprehensive information to investors and the public regarding their financial condition,

operations, and prospects. The prospectus is a legal document that contains this information and

is required to be provided to prospective investors in connection with the issuance of securities.

x. The prospectus nature:

The prospectus is a formal document that provides detailed information about a company and its

securities to potential investors. It typically includes information about the company's business,

management, financial statements, risk factors, and terms of the offering. The prospectus is
regulated by securities laws and must be approved by regulatory authorities before being

distributed to investors.

xi. Liability in respect of prospectus:

The liability in respect of the prospectus refers to the legal responsibility that companies,

directors, and other parties may have for any misstatements or omissions contained in the

prospectus. This liability may arise under securities laws and regulations and can result in civil or

criminal penalties if the prospectus is found to be misleading or deceptive.

xii. Allotment of shares:

Allotment of shares is the process by which a company issues shares to investors who have

applied for them. This process typically involves the company's board of directors approving the

allotment and issuing share certificates to the allottees.

xiii. Nature of allotment of shares:

The nature of the allotment of shares refers to the terms and conditions under which shares are

allocated to investors. This includes the price at which the shares are issued, any conditions

attached to the allotment, and the rights and obligations of the allottees as shareholders of the

company.
REFERENCES

Companies Act, 2013 (India), Section 43.e:

Companies Act, 2013 (India), Section 85.

Companies Act, 2013 (India), Section 26.

Companies Act, 2013 (India), Section 34.

Companies Act, 2013 (India), Section 39

. Companies Act, 2013 (India), Section 39.