Short Note CLSP: 01

Short Note

1. Insider Trading/Dealing :
   If a person dealing with in company securities with a view to meeting a profit or avoiding loss while in possession of information that it generally known would affect their price. (It is prohibited from such dealing as per securities act.).Those who are or have connected with a company (e.g. Directors company secretary, employees, potential advisors) are prohibited from such dealing as well as restricted to convey the information to outsiders has access to the insiders information of a company and based on that he makes profit /Gain on trading of share of that company then he will be called an insider trading.
2. Mutual Fund :
   Mutual funds mean any fund comprising of multiple shares of listed securities. Now-a-day there is the mutual fund company, which from various sources of mutual fund.
   Mutual fund is the financial innovation of the 20^th century .It provides for a novel way of mobilizing savings from small investors and allowing them to participate in the equity of securities of the industrial organization with less risk.
   In a mutual fund, a group of investors pool their money. Which is invested in the various financial securities, the return obtained from the investment is shared among the investor in proportion to their investment. The mutual fund also employs a professional team to carry out the investment. The main feature of a mutual fund is that it makes diversification of portfolio a possibility for the small investors who otherwise may not be able to do so.
3. IPO :
   When any public ltd. Company (PLC) offers general public to subscribe its share through a prospect, that offer is said initial public offer (IPO). Business is like a wheel. It keeps moving and as it moves, it expands when it is expands, its need further fund to finance the expansion. Then need collect fund through IPO.
4. Price sensitive information (PSI) :
   Price sensitive information is such information, by the disclosure of which might affected market price at the respective securities. PSI may contain any of the following ------

• Dividend related information
• Any sort of financial specification
• Declaration of bonus share
• Declaration of right share
• Extension or Disposal decision of companies fixed assets.

1. Special Resolution : [Sec-87 (2)]
   A special resolution is a resolution of members passed by three fourth (3/4) majority as explained under extra-ordinary resolution .of which not less than 21 days notice has been duly given and intention to propose such resolution as special resolution has been specified in the notice [sec-87(2)]
   Under the act following business are transacted by special resolution.

• Alteration of the name of company [Sec-11]
• Alteration of articles of association [Sec-20]
• Alteration of memorandum of association [Sec-12]
• Valuation of share holders rights
• Reduction of share capital of the company [Sec-59]

1. Ordinary Resolution :
   When a resolution is passed by a simple majority of the votes of the members entitled to vote either in person or by proxy its is called ordinary resolution .(The matter which are not required special resolution as per provisions of the company act or of the article of the company to be done ,can be done by means of an ordinary resolution.) To pass an ordinary resolution no special time limit is required but normal time is to be no special time is required but normal time is to be maintained which is 14 clear days .
   The following business may be transacted by an ordinary resolution ------

• Adoption of statutory report [Sec-83]
• Declaration of dividend
• Issue of shares at a discount [Sec-153]
• Adoption of annual accounts [Sec-183]
• Appointment of auditor & fixed their remuneration [Sec-210]

1. Extra Ordinary resolution :
   An extra ordinary resolution is the resolution passed by a majority of not less then three forth (3/4) of such members as being entitled to be present either in person or by proxy. The intention to pass such resolution as extra ordinary resolution has been specified in the notice. The length at the notice in this case is 14 clear days. Extra ordinary resolutions are passed for very limited instances and mainly in winding up cases.
2. OTC:
   OTC Stands for over the counter .This is are kind stock exchange where non listed and de-listed securities are traded.
3. Managing Agent :
   Managing Agent means a person, firm or company by whatever named who or which is entitled to the mgt. of the whole affairs and business of a company by virtue of an agreement with the company and under the control and direction of the directors except to the extant if any, otherwise provided for in the agreement.
   Managing agent is a person ,firm a company entitled to the management of the whole affairs of a company by virtue of an ago agreement with the company and under the control & direction of the directors except to the extent ,if any otherwise provided for in the agreement.
   The minimum term of managing agent is 20(Twenty) years managing agent can be re-appointed after completion of first 10(Ten) years and in all for 20(Twenty) years.
4. Floating Charge :
   A floating charge is an equitable charges an some or all of the assets of the companies either present or future.
   When a company creates floating charge on some of property it cannot make further charge on that particulars property unless allowed by previous charge, Debentures are unusually secured by allotting charge on the assets of the company, Characteristics:

• It should be a charge upon class of assets both person & future.
• The class of assets charged must be one which in the ordinary course of business of the company would be changing from to time.
• It should be contemplated by the charge that until any step is taken by the mortgage, the company shall have the right to use the assets of the property charged in the ordinary course of business.

1. Quorum of board meeting :
   The quorum requisite for directors meeting is subject to the provision of the articales of association of the company ,regulation 89 of the companies act.,Howover provides that the quorum necessary for the transaction of business at the board meeting may be fixed by the directors and unless so fixed, it shall be three.
   Business of the board meeting will be valid it only quorum requisite is present. if a board meeting there is no quorum, the meeting will be automatically adjourned to the same day next week at the same time and place, if the day to which the meeting is adjourned is a public holiday then the meeting will be held next working day.
2. Pre IPO placement or Private placement of share :
   Private placement is a cheaper method of issuing shares ,under this method new securities are sold directly to large institutional investor instead of being sold to the general public such as foreign fund manager.
   If any issuer make private placement with investor the amount so placed including the names and address of such investor shall be disclosed in details in the financial structure section of the prospectus. Private placement is more appropriate to smaller issue.
3. Transfer & Transmission of share :
   Transfer of share denotes a voluntary passing of property in certain share from one person to another by presenting to the company a duly stamped instrument of transfer ,by or on behalf of the transferor or transferee .Containing their names, address & occupation along with the share certificates relating to the share to be transferred.
   Requirement transfer of share:

• Instrument of transfer to be delivered to the company
• Instrument of transfer to be signed
• Instrument of transfer to be in the prescribed form
• Stamp duty & endorsement
• Notice of transfer

Transmission of share :

Transmission of share is the processing of the title and rights of share from one person to another on the happening of certain events like :

• By death
• By insolvency
• By insanity and other similar events.

In all such cases the legal representative or the officer assignee or receiver or administration appointed by the court shall be entitled to the share.

1. Book-Building Method :
   Book-Building method means the process by which an issuers attempts to determine the price to offer its security based on demands from institutional investor. It is also a capital issuance process used in IPO which bids price and demand discovery. It is a process used for marketing a public offer of equity share of a company .It is mechanism where, during the period for which the book for the IPO is open bids are collected from investors at various prices, which are above or equal to the floor price. The process aims at tapping with wholesale and retail investor.
   The offer issue price is taken then determined after bid closing date based on certain evalution criteria.
2. Director Report :
   The Directors have to make out a short resume on the activities of the company which is called directors report. This is to be attached to be annual accounts which are placed before the general meeting for consideration of the shareholders. The director report should indicate any changes which may have accrued during the financial year:

• In the nature of the company’s business
• In the company’s subsidiaries or In the nature of their business
• Generally in the classes of business in which the company has same interest.
• About relevant details of material changes & commitments.

 Director’s report should deal with the company’s affairs in general & indicate the amount recommended as dividend and the amount proposed to be carried to reserves. It should also mentioned about any significant change taking place between the data of balance sheet and of the report.

1. Divisible profits :
   Divisible profits are those profit which can be legally distributed to the shareholders of a company in the form of dividend.
   No dividend shall be paid otherwise then out of profit of the year or other undistributed profits.
   The company law does not lay down the manner in which the profit of the company is to be ascertained. It also does not define as to what profit can be distributed as dividend.
2. Corporate Governance :
   Corporate governance refers to the structures & process for the direction & control of companies.Corporate Governance concerns the relationship among the management ,Board of directors controlling shareholders,minority shareholders and other stakeholders.
   Good corporate governance contributes to sustainable economics development by enchancing the performance of companies and increasing their access to outside capital .To ensure interest of shareholders and the wider community .The corporate governance concern the following matters :

• The responsibility of directors
• The appropriate composition of the board of directors
• The necessity for good internal control and audit committee
• The relationship with external auditors.

It is particular important for publicly traded companies because large amount of money are invested in them, either by small share holders, or from person schemes and other financial institutions.

1. Fixed charged & Floating charge :
   A charge on property is created when it is made liable for the payment of the money .A charge may be fixed or floating.
   A fixed charge in one which create legal interest of a specific property of the company or all the property of the company .Thus a fixed is equivalent to a mortgage .The company can sell ,lease etc. of the property subject to the right of the charge holder.
   The floating charges does not amount of mortgage .The owner of such a property can deal with it and the transferee gets it, free of charge.
2. Official liquidator :
   An official liquidator is a senior government official who is appointed by the court and undertakes all the responsibilities to process the winding up till it is dessolute.
   Power of an official liquidator is two fold .One  is as directed or empowered by the court and other virtue of the position he hold as a official liquidator.

• Sue on behalf of the company
• Continue business of the company
• Honor any contruct of the company before winding up
• Sell the property of the company
• Make agreement on behalf of the co.
• Take Doan on behalf of the co.

1. Resolution by circulation :
   If provided in the articales, the director may pass a resolution by circulation ,Sign by all the director without convening  a board meeting ,but passing of a resolution of circulation does not constitute the holding  of a board meeting. It is to be passed only in cases where calling of a board meeting may not be convenient. Such a circular resolution must be recorded in the immediate following board meeting and will from part of minutes of the said meeting .Resolution passed by circulation helps curtail recurrence of board meeting for routine matter.
2. Return on allotment :
   The return on allotment is a document which is required to file with the register within 60 days of the allotment of share. Where a company having a share capital makes any allotment of its shares, It requires to file a return in which the following particular shall be stated .
   
   

• The number & nominal amount of share allotted
• The name ,Address & occupations of the allot tees
• The amount paid or due and payable on each share
• Except bonus share of the share are allotted as fully or partly paid up for consideration other then in cash, the copies of the agreements duly stamped and verified in the prescribed manner.

1. Prospectus :
   Prospectus is an invitation to the public to subscribe to the share capital of any company .A the need for capital generation by a public limited company is materialized through the issuance to the prospectus. This invites the public to subscribe its share or debentures actually it is a printed pamphlet circulated and advertised in the newspaper .A copy of the prospectus dated and signed by the directors must be filed with the RJSC before publication .It must also be in agreement with the conditions paid down by SEC.
   List of some specific requirements:

• Name of the company with date of incorporation
• Date of the prospectus
• Consent of the SEC
• Capital outlay
• Business management background and prospect in brief
• Name of the director with address & other particulars
• The Qualifying share of directors
• Remuneration of the directors
• The minimum subscription on capital
• The name & address of vendors if any and the mode of payment of purchased price and goodwill ,if any
• The underwriting commission or brokerage, if any ,payable for effecting sale of share.
•  The amount to be paid during application & allotment
• The amount ,if any ,to be paid to the promoters and the mode of payment
• Name of the director with address
• The number of clauses of shares, if any ,& the nature & extend of the interest of the holders in the property and profit of the Co.
• The estimated amount of preliminary expenses
• Dividend policy and the expected dividend to be declared by the company
• The risk factors involved
• The rights of voting of each class of shareholders where share are so classified.
• A report by auditors on profit and the dividend declared
• Bankers and bankers/manager to the issue
• Contents of the memorandum etc.

1. Statement in lieu of prospectus :
   One of the intention of form a public limited company is to raise its capital from the general public ,when in public limited company purchased its capital from private arrangement a statement in lieu of prospectus is submitted to the registrar in the absence of prospectus ,This statement most be signed by every person who is named therein in a director or a proposed director of the company or by its agent authorized in writing in the form and containing the particulars as set out in the formats in schedule- IV including part -i & iii. When minimum subscription is not collected public limited company prepares statement in lieu of prospectus. It cannot invite public for purchase of any share or debentures.
2. Short Selling of share :
   Short selling means selling of any share/debentures in the trading system of stock exchange without having ownership of that instrument or without processing the same short selling is prohibited in the securities law.
   Example:
   Suppose Mr. Toufiq have only 50 share of musa pharma.If he sells 100 shares in the trading system of stock exchange, Then it will be called a short selling.
3. Office of profit :
   Any director other then managing director is restricted from accepting any office of profit in the company other than his directorship .The term “office of profit “inherently bears the meaning of salary and other benefits from the company. The board of director may appoint the managing director and fix his salary and other benefits .Any other directors cannot accept such an office of profit without the consent of the company in the general meeting as prescribed in section by.
4. Common Seal :
   Every registered company is an inanimate person that person also signs and the common seal is its signature. The common Seal means the name of the company engraved in legible characters embossed (to decorate with letters) and mounted (organized) on a seal hold this is apart from the rubber stamps of the company and carry statutory importance. When affined these seal takes the shop of an inviolable mark, this seal is the official signature of the company. It is to be fixed on only those documents as are provided in the articles.
   Everybody corporate having a perpetual succession must have a common seal .This requires a board resolution for affiliation under at least two signatures.
5. Quorum :
   Quorum is the minimum number of person required to enable a meeting go into session in order to serve the purpose of a meeting. It is desirable and necessary that it should be attended by a moderate number of its members to prevent misuse or abuse of powers. For this reasons a convention has grown up for minimum attendance in a meeting. The number of this minimum attendance, which is otherwise known as “Quorum” ,is laid down in this in the roles of quorum .According to company act -1994 in case of a private company 2 (Two) number and in case of any other company 5(Five) number personally present, shall be a quorum .
6. Proxy :
   Proxy may define as a person authorized to attend and vote at the meeting in the absence or on behalf of a member .To act and vote by a proxy. A statement in this regards is required to contain in the notice to be sent. Through a proxy is entitled to vote .He has no right to speak.
   Unless the articles otherwise provide, the following rules are applicable in case of appointment of proxy.

• A proxy not is appointed in the case of a company which has no share capital.
• A number of private companies can’t appoint more than one proxy in the meeting.
• Except on a poll, a proxy can’t vote.
  
  

1. Voluntary winding up:
   A voluntary winding up is different from compulsory winding up ,This mode of winding up is more common and advantageous in the present days ,when the members and the creditors settle the affairs of the business in their own accord without the intervention of the court ,It is called voluntary winding up.
   The voluntary winding up may be of two types:

• Members voluntary winding up
• Creditors voluntary winding up
  A voluntary winding up is said to be members voluntary winding up when a declaration of solvency is made by the directors in accordance with the provision of this act.
  When a resolution is passed at the general meeting to kind up a company voluntarily, without any declaration of financial solvency of the company. It is called creditors voluntary winding up.

1. Return on allotment :
   The return on allotment is a document which is required to file with the registrar within 60days of the allotment of share. Where a company having a share capital makes any allotment of its shares .It requires to title a return in which the following particulars shall be stated------

• The number and nominal amount of shares allotted
• The names ,Address and occupations of the allots
• The amount paid or due and payable on each share
• Except bonus shares of the shares are allotted as tully or partly paid up for consideration other then in cash ,the copies of the agreements duly stamped and verified in a prescribed manner.

1. Allotment of shares :    
   By issuing prospectus the company invites public to purchased share. Persons who are interested to take shares apply to the company and when the company accepts the said offer for the purchased of share is known as allotment of shares.An allotment is generally either more or less than the acceptance by the company of the offer to take shares .The allotment of share is an appropriation by the director of share to a particular person .He becomes the share holder of that company.
   General principles of allotment of shares are :

• An allotment must be made by proper authority.
• Allotment to be made in a reasonable time
• Allotment must be communicated to the applicant.
• Allotment must be absolute and unconditional

1. Authorized Capital :
   Any amount with which the company is proposed to be registered and which is set out in the MOA is known as registered or nominal capital of the company .Again it is also named as the authorized capital since ,the company is authorized to raise only that amount mentioned in the MOA by issue of share.
2. Right Share :
   Right share are those shares, which are issued after the original issue of shares but having an inherent right of the existing share holder to subscribe to those shares in proportion of their holdings. These shares can however be issued to the non-member when the existing share holders do not accept the offer within a prescribed time limit. The issue of right share must be within the limit of authorized capital of the company .Right share are to be made as per SEC guidelines and listing regulation. Generally right shares are issued to the existing shareholder at a concessive rate.