Section 49: Calls on shares of same class to be made on uniform basis.
Any requests for additional share capital made in relation to a class of shares must be made uniformly with respect to all shares included in that class.
For the purposes of this section, shares with the same nominal value but differing amounts of paid-up capital are not considered to belong to the same class.
The term “same class” as used in this Section refers to shares that have the same nominal value and the same amount of paid-up capital. On all the shares of that same class, a consistent appeal for increased share capital must be made. Therefore, a corporation is prohibited from discriminating against or favoritizing shareholders who belong to the same class in terms of the timing or quantity of call payments. In the case of Major Teja Singh v. Liquidator, this was maintained.
The sections of the Companies Act, 2013 (CA 2013) that deal with share capital and debentures are found in Chapter IV (Sections 43-72). In accordance with Section 49 of CA 2013, calls on shares belonging to the same class must be made uniformly.
The Ministry of Corporate Affairs (MCA) published Notification No. S.O. 2754(E) on September 12, 2013, which included a notification of Section 49 of the Companies Act, 2013. The effective date of this notification, or the start date of section 49, is September 12, 2013, which is when it was released.
The Companies Act of 2013 defines a company as a legal organization created by a group of individuals who come together to pursue a particular goal in accordance with this act or prior company law. There are many different types of companies, including limitless companies, companies limited by shares, and others. Each firm has shares, which are the financial interests of its shareholders. Share capital, which allows shareholders to own shares within the corporation, is present in a company limited by shares.
A call on shares is a request issued by the company’s directors informing the shareholders that they must pay the company a specific sum of money as was either partially or entirely agreed. The company directors are responsible for posting the call notice in accordance with the legal entity’s bylaws.
A legally binding responsibility of the shareholders to the Company is the unpaid money in partially paid shares. This implies that the Company has the authority to request payment at any moment through its board of directors if it believes it is necessary to settle the liability. Companies often collect the share price at the time of the initial share issuance.
- Payment of at least 5% of the nominal share amount for some shares throughout the application process.
- You should only pay a portion of the share price during the share allocation. Last but not least, the shareholders should pay the remaining balance when the company requests it through the board of directors.
- The risk is often limited to the premium paid, which is the only benefit of buying a call option.
Legal Rules Concerning the Calls
The following summarizes the legal requirements regarding placing calls:
1. Call should be Bona fide: The power to make calls typically has trust-like characteristics, allowing it to be used in a genuine manner that benefits the firm. It must not be produced for personal gain. It implies that the decision can only be made by the directors or liquidator when there is a legitimate demand for finances.
2. Uniformity: All shares belonging to the same class should be called in exactly the same way. The call is invalid if it is made exclusively on a subset of the same class of shareholders and not on all of them, or if a higher sum is asked from certain shareholders than from others of the same class.
Making Calls: How to Do It
In most companies, the process for placing calls is outlined in the Articles. A firm shall abide by the terms of its own Articles if it has them. If not, Table A of the Act’s rules will be in effect. At this point, it is important to note the following Table A provisions.
1. Typically, the Board of Directors has the authority to make decisions.
2. A resolution should be passed by the Board during its meeting to make the calls.
3. At no point shall the call money’s total worth surpass 50% of the share’s face value. Companies, however, are allowed to increase this restriction and have their own Articles.
4. There must be a 30-day gap between any two consecutive calls.
5. A “Call Letter” or “Call Notice” should be given to all shareholders belonging to the same class whenever a call is made.
6. The warning must be delivered at least 14 days prior to the deadline for payment and include information such as the call’s cost, the location of the payment, etc.
7. After a call has been made, it may be revoked or postponed by the board of directors.
8. Calls must be paid by joint shareholders jointly and severally.
9. In the event that a member fails to pay call money, he is responsible for paying interest up to the rate indicated in the articles or terms of issue. The directors have the option to forego paying interest.
10. If a member wishes to pay the call money in advance, the directors may, in their sole discretion, accept and pay interest up to the rate allowed by the Articles.
11. A member who has not paid his call money will not be allowed to vote until he does so.
History of Section 49 in the Law
The Companies Act of 2013’s Section 49 was derived from Section 91 of the Companies Act of 1956. In the Companies Act of 2013, it has been verbatim reprinted. It seeks to expressly provide that any requests for increased share capital made on shares of a class will be made uniformly on all such shares.
As a result of the Company Law Committee’s Report’s earlier recommendation, it was included in the 1956 Act and kept in the 2013 Act. The Joint Committee recommended including a statement to make it clear that shares with the same nominal value will belong to distinct classes if the amounts paid up on the shares are different.
Rules pertaining to Section 49.
Along with Section 49, Section 91’s check list, Regulations 13 to 18 of Table F (as applicable to a company limited by shares) of Schedule I of the 2013 Act, and Regulations 48, 99, and 144 of the Provisions of the SEBI (LODR) Regulations, 2015, are to be read collectively.
According to Section 91 of the Companies Act 2013, it must be verified that (a) any calls on shares were made during the year, (b) if they were, whether they were made on a consistent basis, and (c) whether or not the processes outlined by the Act and the company’s articles were followed. The various paperwork that is needed includes: (a) if any, a call log; and (b) Board meeting transcripts.
Regulations 48, 89, and 144 of the SEBI (LODR) Regulations, 2015
With regards to the call of shares, the Regulations stipulate the following.
(a) Maximum time: Within 12 months of the date of issue allocation, the entire subscription must be called.
(b) Forfeiture: If the call money is not paid within a year, equity shares with unpaid calls on them will be forfeited.
(c) Monitoring agency: When a monitoring agency has been appointed for a particular issue, the obligation for calling up the subscription amount within 12 months does not apply.
As was made clear throughout this text, a firm must adhere to the guidelines set forth in the Companies Act’s numerous clauses. To avoid protracted legal disputes, every step must be strictly followed. Furthermore, because shares are a crucial source of funding for a company, the board of directors shouldn’t be loose with their decisions, and they should always follow the guidelines outlined in the company’s articles of incorporation.