COMPANY LAW

UNIT- 1
JOINT STOCK COMPANY
By Ms. Sreekeerthana V
Assistant Professor
Dept. of Commerce
• A joint stock company is an organization which is owned
jointly by all its shareholders. Here, all the stakeholders
have a specific portion of stock owned, usually displayed
as a share.
• Each joint stock company share is transferable, and if the
company is public, then its shares are marketed on
registered stock exchanges. Private joint stock company
shares can be transferred from one party to another party.
However, the transfer is limited by agreement and family
members.

What is Joint Stock Company?

By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 Definition of Joint Stock Company
Professor Haney defines it as “a voluntary
association of persons for profit, having the
capital divided into some transferable shares,
and the ownership of such shares is the
condition of membership of the company.”

By Ms.Sreekeerthana V
 Features of Joint Stock Company
• Separate Legal Entity – A joint stock company is an individual
legal entity, apart from the persons involved. It can own assets and
can because it is an entity it can sue or can be sued. Whereas a
partnership or a sole proprietor, it has no such legal existence apart
from the person involved in it. So the members of the joint stock
company are not liable to the company and are not dependent on
each other for business activities.
• Perpetual – Once a firm is born, it can only be dissolved by the
functioning of law. So, company life is not affected even if its
member keeps changing.
• Number of Members – For a public limited company, there can be
an unlimited number of members but minimum being seven. For a
private limited company, only two members. In general, a
partnership firm cannot have more than 10 members in one business.

By Ms.Sreekeerthana V
• Limited Liability – In this type of company, the liability
of the company’s shareholders is limited. However, no
member can liquidate the personal assets to pay the debts
of a firm.
• Transferable share – A company’s shareholder without
consulting can transfer his shares to others. Whereas, in a
partnership firm without any approval of other partners, a
partner cannot move his share.
• Incorporation – For a firm to be accepted as an
individual legal entity, it has to be incorporated. So, it is
compulsory to register a firm under a joint stock
company.

By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 Advantages of Joint Stock Company

• High amount of capital

• Limited liability
• Low risk investment
• Perpetual succession
• Separate entity
• Transferability of shares
• Efficient management
• Credit facility

By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 Disadvantages of Joint Stock Company

• Complexity of formation
• Creation of monopoly business
• Bureaucracy
• Nepotism
• High administrative cost
• Overlook of the shareholder
• Scope of fraud
• Tide following law
• Expose of secrecy

By Ms.Sreekeerthana V
 How does a joint stock company work?

Joint stock company is a type of business

organization that is owned by its investors.
In a joint stock company the company stock
can be bought and sold by the shareholders.
Shareholders should be having possession of
at least 1 stock of the company in order to be
counted as a partial owner.

By Ms.Sreekeerthana V
What are the legal documents required for a joint
stock company?

Joint stock company requires the following legal

documents:
• Article of Association
• Memorandum of Association
• Prospectus

By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 KINDS OF COMPANIES
I UNINCORPORATED COMPANIES:
The companies, which are not incorporated under the
companies act or special act or charter are called
unincorporated companies.
II INCORPORATED COMPANIES:
Companies which are established by means of incorporation
under the company act or under the specific act or a
character or called incorporated companies
1. Classification on the basis of incorporation
2. Classification on the basis of liability
3. Classification on the basis of members
4. Other forms of companies.
By Ms.Sreekeerthana V
1. Classification on the basis of incorporation:
• Chartered companies
• Statutory companies
• Registered companies

2. Classification on the basis of liability:

• Companies limited by shares
• Companies limited by guarantee- Share capital, No share
capital
• Unlimited companies

By Ms.Sreekeerthana V
3. Classification on the basis of members
• One person companies
• Private companies
• Public companies

4. Other forms of companies:

• Holding companies
• Subsidiary companies
• Government companies
• Foreign companies
• Association not for profit
• Associate company
• Investment companies
• Producer companies
• Dormant companies
• Small companies By Ms.Sreekeerthana V
 FORMATION OF A COMPANY

A company is an artificial entity created by law for the

purpose of carrying on any object such as business, sports,
research, charity etc. however most companies are formed
for the purpose of conducting business. The process of
forming a company can be divided into 4 distance stages:

i. Promotion
ii. Registration or incorporation
iii. Capital subscription
iv. Commencement of business

By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 STAGES IN THE FORMATION OF A COMPANY

• PROMOTION OF A COMPANY:
Before a company is actually formed, certain persons plan about the starting of some
business and after arriving at the decision about the formation of a company they
take necessary steps in this regard.
Thus formation of a company means originating the idea of forming a company and
taking necessary steps in this regard. The persons who think of forming a company
are known as promoters.

• REGISTRATION AND ONCORPORATION OF A COMPANY:

It is the second stage in formation of a company. We know that a company comes
into existence when it is registered under the companies act. The company so
formed weather public or private maybe the following two types namely:
a) limited company
b) unlimited company
By Ms.Sreekeerthana V
• CAPITAL SUBSCRIPTION:
After the company is incorporated, the next stage is to raise the
necessary capital. In the case of a private limited company, funds are
raised from the members or through arrangement from the bank and
other sources. In case of a public limited company the share capital has
to be raised from the public.

• COMMENCEMENT OF BUSINESS:
A company comes into existence when it is registered and a certificate
of incorporation is issued by the register of a companies. There after a
company become entitled to commence it's business. A private
company can start its business immediately after obtaining the
certificate of incorporation. But a public company will have to obtain a
further certificate known as the “certificate to commence business”
before it can start its business.

By Ms.Sreekeerthana V
Links:
https://www.vedantu.com/commerce/memorandum-of-association
https://blog.ipleaders.in/memorandum-of-association /
https://blog.ipleaders.in/alteration-of-memorandum-of-association/#
When_is_alteration_of_a_Memorandum_of_Association_allowed
By Ms.Sreekeerthana V
• As per Section 2(56) of Companies Act, 2013 memorandum
means the memorandum of association of a company as
originally framed or as altered from time to time in pursuance
of this Act. Memorandum of Association is a legal document
that contains specific information regarding the working of the
company, it also defines the scope of activities of the
company. Memorandum of Association is also called the charter
of the company which contains the rights and duties of the
members and their relation with the company.

• Every individual who wants to start his or her business wants to

have a legal identity for its company, a memorandum of
association contains all the necessary documents that are required
to give legal identity to the company.
By Ms.Sreekeerthana V
 What is Meant by MOA?

The memorandum of association definition explains that all

the powers and the rights should be mentioned in this public
document and no one should depart from the contract as well
as not to Violet the rules and regulations specified in the moa.
If anyone violates, they can be termed as ultra vires of the
company and immediately can void them.

This is the simple and straight away definition of the

memorandum of association of any company. It is completely
under legal survival. All the papers are strictly verified and are
tested by the moa in company law.
By Ms.Sreekeerthana V
 Types of MOA

Based on their form, there are five main types of memorandum of

association and they are as follows: 
• Table A - if shares end up limiting a company. 
• Table B - if a guarantee limits a company. 
• Table C - if a guarantee along with share capital limits a
company. 
• Table D - if it is an unlimited company. 
• Table E - if it is an unlimited company and has a share capital.

By Ms.Sreekeerthana V
 Contents of MOA

1. Name Clause
2. Situation Clause
3. Object Clause
4. Liability Clause
5. Capital Clause
6. Subscription Clause

By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
1. Name Clause:
As the title suggests, a name clause specifies the name of the company. Under
Section 4(1)(a) of the Act, the name of any public limited company must end
with the word “limited”. Furthermore, in the case of a private limited company,
the company’s name must end with the word ‘Private Limited’. However, the
said Section exempts companies incorporated especially under Section 8 of the
Act (for charitable objects) from such requirements. 
Sections 4(2) to 4(5) of the Act mandate certain characteristics of any
company’s name. It states that the name stated under the Name Clause of the
Memorandum of Association must not:
• Be identical or overly similar to any other company already registered under
the Act; 
• Be such that it constitutes an offence under any law or is undesirable
according to the Central Government; 
• Contain any word or expression that may exhibit the company as having a
connection with the Central Government, State Government, or any local
authority in any way; 
By Ms.Sreekeerthana V
2. Registered Office Clause
• Section 4 of the Act states that the Memorandum of
Association of any company must specify the state in which
the registered office of the company is to be situated. As per 
Section 12 of the Act, within 15 days of its incorporation, a
company must specify the location of its registered office.
Further, within 30 days of its incorporation, such a company
must provide to the Registrar of Companies (ROC) the
verification of its registered office.  

By Ms.Sreekeerthana V
3. Object Clause
Section 4(1)(c) of the Act mandates that the Memorandum of
Association of any company must state the objects for which it is
proposed to be incorporated. The object clause is arguably the
most essential clause of a Memorandum of Association. It
specifies the reason for which the company is incorporated. It
states the business in which the company is involved. No
company can operate beyond the scope enumerated in the
Memorandum of Association. 
Generally, the object clause contains three kinds of objects- main,
ancillary, and other objects. The ancillary and other objects follow
the main object of the company. 

By Ms.Sreekeerthana V
4. Liability Clause
Under Section 4(1)(d) of the Act, the liability clause of the
Memorandum of Association must state the liability of the
company’s members. It means that the Memorandum of
Association must specify whether their liability is:
• Limited or unlimited; or
• Limited by shares or guarantee.
If it is a company in which the members’ liability is limited by
shares, then such liability will be limited to the unpaid amount of
the shares held by them. In contrast, if their liability is limited by
guarantee, then such liability will be limited to the amount up to
which each of their members attests to subscribe. 

By Ms.Sreekeerthana V
5. Share Capital Clause  
The capital clause in a Memorandum of Association is one that
specifies the company’s authorized capital. It states the total
number of shares and the value of each share. Such an authorized
capital is the maximum limit up to which a company can raise its
capital.
Section 4(1)(e) of the Act deals with the capital clause in a
Memorandum of Association. It provides that the capital clause
must state the share capital with which the company desires to be
registered and the fixed amount and number of shares. Further, the
said Section also mandates that no subscriber can subscribe to less
than one share. 

By Ms.Sreekeerthana V
6. Subscription Clause
The subscription clause in a Memorandum of Association contains
the list of the names of the first subscribers of the company. It states
the number of shares held or the amount agreed to be contributed by
each subscriber as the initial capital of the company. The
Memorandum of Association is signed by all the subscribers. 
The minimum number of subscribers for 
• A one-person company is one,
• A private limited company is two, and 
• A public limited company is ten. 
There is no maximum limit on the number of subscribers. 

By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 WHEN IS ALTERATION OF A MEMORANDUM OF
ASSOCIATION ALLOWED
Generally, the alteration of a company’s Memorandum of
Association is allowed under the following circumstances: 

• When such an alteration is needed to let the company venture

into new businesses related to the one in which it is already
involved;
• When such an alteration is pertinent to enable the company to
upgrade its existing means to carry out its objects, or
• When altering the Memorandum of Association will help the
company carry on its business more economically. 

By Ms.Sreekeerthana V
PROCESS OF ALTERATION OF MEMORANDUM OF
ASSOCIATION:

Step 1- Notice of meeting of the Board of Directors

Step 2- Meeting with the Board of Directors
Step 3- Notice of Extra-ordinary General Meeting
Step 4- General Meeting 
Step 5- Filing application with the registrar of the company

• Link:
https://blog.ipleaders.in/alteration-of-memorandum-of-association
/#
When_is_alteration_of_a_Memorandum_of_Association_allowed
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
1. Altering the Name Clause:
Sections 4, 13(2), 13(3), and 16 of the Act provide for the alteration in
the Name Clause of a Memorandum of Association. A company that has
passed a special resolution for the purpose can change its name by filing
an application (Form INC 24) in the Reserve Unique Name (RUN) web
portal service approved by the Ministry of Corporate Affairs (MCA).
The RUN service can be availed only after log-in into the MCA portal. 

The MCA takes 2-3 days to approve the newly proposed name. It will
send the name approval letter if the name is in accordance with Sections
4(2) to 4(5) of the Act. Under Section 13(2) of the Act, any change in a
company’s name shall take effect only after it is expressly approved by
the Central Government. Nevertheless, such approval is unnecessary in
case the change is simply the addition or deletion of the word ‘Private’
when the company gets converted from one class of company to
another. 
By Ms.Sreekeerthana V
• Once the name of the company is altered, the RoC will replace
the old name with the newly altered name in the register of
companies. After registering it, the RoC will issue a new
certificate of incorporation with the altered name printed on it.
The issue of the fresh certificate of incorporation marks the
end of the company’s name change.  

2. Altering the Registered Office clause

• Sections 12(4), 12(5), 13(4), 13(5), and 13(7) of the Act give
the provisions as to the change in the registered office clause
of a Memorandum of Association. For altering the registered
office clause in case the registered office is to be shifted within
the local limits of the same city, after passing a special
resolution for the purpose, the company can file an application
(Form INC 22)  with the RoC. 
By Ms.Sreekeerthana V
3. Altering the Object Clause
Under Section 13(9) of the Act, the Object Clause in the
Memorandum of Association of any company can be altered by
passing a special resolution in this regard. The said Section provides
that any company that wishes to alter its Object Clause must pass a
special resolution and get it approved by the RoC within 30 days of
passing the resolution. For that, the company should file Form MGT
14, following which the RoC shall register such a proposed change
and issue a certificate thereof.   

By Ms.Sreekeerthana V
4.Altering Share Capital Clause  
Sections 13 and 61 deal with the alteration of the share capital
clause in a Memorandum of Association, provided the
company’s Article of Association (AOA) permits it. Such an
alteration may include the following;
• Increase the authorized share capital of the company;
• Increase or decrease the amount of each share;
• Convert its fully paid-up shares into stock or vice versa, and
• Cancellation of shares.
The alteration of the Share Capital Clause of a company
requires the passing of an ordinary resolution at a general
meeting in that regard. Within 30 days from passing the
resolution, Form MGT 14 must be filed with the RoC, who
shall then register the change in the Register of Companies. 
By Ms.Sreekeerthana V
5. Altering Liability Clause
The Liability Clause in a Memorandum of Association can
be altered by passing a special resolution in this regard.
Within 30 days of passing the resolution, the company must
file an application (Form MGT 14) with the RoC.
 
6. Altering Subscription Clause 
The Subscription Clause in the Memorandum of
Association cannot be altered throughout the life of the
company.

By Ms.Sreekeerthana V
DOCUMENTS REQUIRED FOR ALTERATION OF
MEMORANDUM OF ASSOCIATION
Generally, to alter any clause in a Memorandum of Association,
the following documents are required to be sent along with the
application filed under Section 13 of the Act; 
• Copy of the Memorandum of Association along with the
proposed changes;
• A detailed report of the details of the board and general
meetings in which the resolution allowing such an alteration
was passed;
• A certified copy of the resolution passed by the Board, and
• The list of creditors and debenture holders, along with their
names, addresses, debts, claims, or other liabilities due to them.
By Ms.Sreekeerthana V
 DOCTRINE OF ULTRA VIRES

As discussed above, a Memorandum of Association defines the relationship

between the company and its members. The Memorandum of Association
states the object of incorporating the company. It provides an overview of the
company’s operations. As per the doctrine of ultra vires, the company is not
supposed to bypass the boundary set by the Memorandum of Association on
the company’s activities. If the company does any act outside its operational
scope specified under the Memorandum of Association, such an act will be
held ultra vires. 

The term ‘ultra vires’ is Latin, and it means ‘beyond the powers.’ Such an ultra
vires act shall be null and void. It cannot be ratified by the company’s Board of
Directors (BoD). Similarly, any contract entered into by the company against
the provisions of its Memorandum of Association shall be ultra vires and have
no binding effect on the company. Nevertheless, the doctrine of ultra
vires allows the company to do any act that may be incidental to its main object
specified in its Memorandum of Association.  
By Ms.Sreekeerthana V
The doctrine of ultra vires was essentially brought forth to safeguard the
interests of the members—that is, the shareholders and creditors of any
company. The shareholders or creditors of the company invest in it by
essentially considering its main objectives.

They invest in a particular company, considering various factors like

the market trends, the reputation of the company, etc., and expect to
get a good profit out of it. They invest, thinking that their investment
will be used only for the purposes about which they were already
informed. They expect the company to be consistent with its objectives.

So, the doctrine of ultra vires prevents the company from going beyond
its permitted limits of operation. That is why altering the
Memorandum of Association of any company follows a lengthy and
complex process to ensure the company expands its scope of operation
without being affected by the doctrine of ultra vires. 
By Ms.Sreekeerthana V
 Case laws
Ashbury Railway Carriage and Iron Company Ltd. v. Riche (1875)
One of the landmark cases on the doctrine of ultra vires in company law is 
Ashbury Railway Carriage and Iron Company Ltd. v. Riche (1875). In this case, the
object clause of the Ashbury Co. provided the following as its objects: 
• To make, sell, lend, or hire railway carriages and wagons, and all kinds of railway
plants, fittings, machinery and rolling stock; 
• To carry on the business of mechanical engineers and general contractors; 
• To purchase, lease, work, and sell mines, minerals, land and buildings; 
• To purchase and sell as merchants timber, coal, metals, or other materials, and
• To buy any such materials on commission or as agents. 
Ashbury Co. entered into a contract with the defendant company, Riche, to construct a
railway line in Belgium. Though the contract was initially ratified by the members of
Ashbury Co., it was later repudiated by it. The defendant sued Ashbury Co. for breach
of contract. In the end, the Court held that the contract was beyond the objects
specified in the Ashbury Co.’s Memorandum of Association, and so it was held void.
The Court held that the phrase “to make, sell, lend, or hire railway carriages and
wagons, and all kinds of railway plant” did not mean the company could build an
actual railway line. Ultimately, the contract was held to be ultra vires.  
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 Articles of Association
Articles of Association (AOA) refer to a document that contains all
pieces of information relating to the company in formation. From
the type, nature, and purpose of the business to its appointment
process and financial reporting procedures, the AOA covers
everything. In short, this set of credentials acts as a guide and
ready reference for all external and internal stakeholders.

It is the rule book of any company that covers the regulations, and
operational guidelines to follow within the organizational premises
to achieve the business goals and objectives. In addition, the
articles are different from the Memorandum of Association, which
defines the business objectives and the conditions of the company’s
formation.
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 KEY TAKE AWAY
• Articles of association form a document that companies must
file with the government to enjoy a legal status in the
corporate sector.
• It acts as a user manual for the corporate entities in the event
of doubts or questions regarding the standard rules and
regulations to be followed.
• Company details, purpose, duration, share capital, power
distribution, shareholder meetings, and company
organizations are some of the AOA contents.
• While AOA helps companies operate per the rules and
regulations to achieve the goals, the memorandum of
association (MOA) lists those objectives.
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 Contents
The contents of articles of association vary from company
to company, given their requirements. However, there are
some of the aspects that are covered in all AOAs being filed
with the government for approval. 

1. Company Details
• The first one is the details of the company. All basic
information is provided under this separate section of the
AOA, from the name of the entity to the name of the
incorporators and their addresses. As far as the company’s
name is concerned, every government has a different
format that the corporate entities need to follow. Thus,
they must name it per the standards.
By Ms.Sreekeerthana V
2. Purpose
• When a business is incorporated, it is done with a purpose. The AOA has this
section for the incorporators to mention the business goals. It is an important
segment of the document, which the government authorities look into in
detail. Thus, the owners must outline how the business would carry out the
day-to-day tasks.
• As the operational aspect of the company is likely to be noticed with much
attention, this section keeps everything clear. This, in turn, shows the clarity
in the incorporators’ minds, which makes the document easy to read and
understand for further approval from the authorities.

3. Duration
• The duration of the purpose or company formation also requires specific
mention. Some entities form themselves for a specific reason, and once that is
fulfilled, they pull it out. Here, the companies mention whether the
incorporation is seasonal or for one particular objective for a limited period,
or permanent. 

By Ms.Sreekeerthana V
4. Power Distribution
• Delegation of power is necessary for companies if they
aspire to run in an organized manner. Hence, they have a
hierarchy of staff from the management to anyone working
there. The distribution of powers is the section that deals
with this aspect of incorporation. The hierarchy-wise roles
and responsibilities of individuals are mentioned in this
segment.
5. Company Organization
• The AOA gives details about the number of employees and
directors, along with other information related to the
company’s organization. In addition, the details of the 
shareholders, founders, investors, auditors, etc., are found
in this section. 

By Ms.Sreekeerthana V
6. Share Capital
• The rights they all enjoy in the company are briefed herein.
Thus, the AOA lets the authorities understand the
management of the share capital by the companies. Also,
it includes the information regarding the alteration that
occurs in the share capital, calls on shares, 
shareholders’ rights, voting rights, preference shares, etc.

7. Shareholder Meeting
• This section contains the requirements of the general or
director meetings. In addition, the rules that govern the
annual meeting of shareholders are found here, along with
the notices, resolutions, and votes.

By Ms.Sreekeerthana V
 PROSPECTUS

By Ms.Sreekeerthana V
• The prospectus is a legal document, which outlines the
company’s financial securities for sale to the investors.
• According to the companies act 2013, there are four types
of the prospectus, abridged prospectus, deemed
prospectus, red herring prospectus, and shelf prospectus.

By Ms.Sreekeerthana V
 PROSPECTUS DEFINITION

The Companies Act, 2013 defines a prospectus under 

section 2(70). Prospectus can be defined as “any document which
is described or issued as a prospectus”. This also includes any
notice, circular, advertisement or any other document acting as an
invitation to offers from the public. Such an invitation to offer
should be for the purchase of any securities of a corporate body.
Shelf prospectus and red herring prospectus are also considered
as a prospectus.

By Ms.Sreekeerthana V
 ESSENTIALS FOR A DOCUMENT TO BE CALLED
AS A PROSPECTUS

For any document to considered as a prospectus, it should

satisfy two conditions.
• The document should invite the subscription to public
share or debentures, or it should invite deposits.
• Such an invitation should be made to the public.
• The invitation should be made by the company or on the
behalf company.
• The invitation should relate to shares, debentures or such
other instruments.

By Ms.Sreekeerthana V
 TYPES OF PROSPECTUS
According to Companies Act 2013, there are four types of
prospectus.
• Deemed Prospectus – Deemed prospectus has mentioned
under Companies Act, 2013 Section 25 (1). When a company
allows or agrees to allot any securities of the company, the
document is considered as a deemed prospectus via which the
offer is made to investors. Any document which offers the sale
of securities to the public is deemed to be a prospectus by
implication of law.
• Red Herring Prospectus – Red herring prospectus does not
contain all information about the prices of securities offered
and the number of securities to be issued. According to the act,
the firm should issue this prospectus to the registrar at least
three before the opening of the offer and subscription list.
By Ms.Sreekeerthana V
• Shelf prospectus – Shelf prospectus is stated under section 31 of
the Companies Act, 2013. Shelf prospectus is issued when a
company or any public financial institution offers one or more
securities to the public. A company shall provide a validity period
of the prospectus, which should not be more than one year. The
validity period starts with the commencement of the first offer.
There is no need for a prospectus on further offers. The
organization must provide an information memorandum when
filing the shelf prospectus.
• Abridged Prospectus – Abridged prospectus is a memorandum,
containing all salient features of the prospectus as specified by
SEBI. This type of prospectus includes all the information in brief,
which gives a summary to the investor to make further decisions.
A company cannot issue an application form for the purchase of
securities unless an abridged prospectus accompanies such a form.

By Ms.Sreekeerthana V
 CONTENTS OF PROSPECTUS
For filing and issuing the prospectus of a public company, it must be
signed and dated and contain all the necessary information as stated
under section 26 of the Companies Act,2013:
• Name and registered address of the office, its secretary, auditor, legal
advisor, bankers, trustees, etc.
• Date of the opening and closing of the issue.
• Statements of the Board of Directors about separate bank accounts
where receipts of issues are to be kept.
• Statement of the Board of Directors about the details of utilization and
non-utilisation of receipts of previous issues.
• Consent of the directors, auditors, bankers to the issue, expert
opinions.
• Authority for the issue and details of the resolution passed for it.
By Ms.Sreekeerthana V
• Procedure and time scheduled for the allotment and issue of
securities.
• The capital structure of the in the manner which may be prescribed.
• The objective of a public offer.
• The objective of the business and its location.
• Particulars related to risk factors of the specific project, gestation
period of the project, any pending legal action and other important
details related to the project.
• Minimum subscription and what amount is payable on the premium.
• Details of directors, their remuneration and extent of their interest in
the company.
• Reports for the purpose of financial information such as auditor’s
report, report of profit and loss of the five financial years, business
and transaction reports, statement of compliance with the provisions
of the Act and any other report.

By Ms.Sreekeerthana V
 UNDERWRITING
When a company wants to raise funds by the issue of shares or
debentures, it should race at least 90 percentage of the issue with
in a time limit of 120 days from the date of opening the issue. In
order to avoid that risk the public company entered into
underwriting agreements. Underwriting means guaranting to
subscribe to an agreed number of shares or debentures for a
certain consideration.
In other words, the company will pay anyone here certain
percentage of commission on all shares or debentures issued to
the public if the person guarantees that he will take the remaining
shares which are not taken up by the public. As such the person
or institution who under rights the issue is called underwriter and
the commission so paid is known as underwriting commission.

By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
 GREEN SHOE OPTION
• A provision contained in an underwriting agreement that gives the
underwriter the rights to sell investors more share than originally
planned by the issuers. This would normally be done if the demand
for a security issue prove higher than expected. Legally referred to as
an over allotment option.
• It provides additional price stability to a security issue because the
underwriter has the ability to increase supply and smooth out price
fluctuations if demand surges. Green shoe options typically allow
underwriter to sell up to the 15% more shares then the original
number set up by the issuer.
• However some issue was prefer not to include green shoe options in
their underwriting agreements under certain circumstances, such as if
the issuer wants to fund specific project with a fixed amount of cost
and does not want more capital then it originally sought.
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V
By Ms.Sreekeerthana V