Home >> Dictionary Of Banking >> Paying Banker to Transfer Of Shares >> Share Capital Shares_P1

Share Capital Shares

company, transfer, stock, banker, certificate, amount and security

Page: 1 2

SHARE CAPITAL. SHARES. A share is the right which a member of a company has to a certain proportion of the capital, the capital being the total fund contributed by the members. un the other hand, he is liable for any unpaid balance there may be on the shares he holds. The memorandum of association of a company limited by shares must state the amount of share capital with which the company proposes to be registered, and the division thereof into shares of a fixed amount. (See MEMORANDUM OF ASSOCIATION.) Shares are known by various names, such as preference, guaranteed, ordinary, de ferred, founders' shares and other varieties. The rights of each class of share depend upon the provisions in the memorandum and articles of association, or in special resolu tions of the company. The rights attaching to a certain class of shares in one company are not necessarily the same as those in another company. (See Section 39, Com panies (Consolidation) Act, 1903, given below.) If authorised by its articles, a company limited by shares may convert its paid-up shares into stock. (See Section 41, below.) This is the only way in which it can create stock. Shares are, practically, divisions of stock in fixed amounts, and a shareholder obtains so many of those divisions, but a stockholder may obtain any odd or irregular amount of the stock ; for example, a share may be for /I, 1;5, iI0, £20, 111)0 and such like amounts, whereas a holding of stock may be for 1:33 16s. I Id. or for any amount.

Before an official quotation on the London Stock Exchange can be obtained for stocks and shares, the certificates must conform to certain regulations of the committee. (See QUOTATION ON LONDON STOCK EXCHANGE.) In the case of a new company, before a special settlement for the bargains for sales and purchases of shares can be fixed, various documents and particulars must be sent to the Secretary of the Share and Loan Department. (See SPECIAL SETTLEMENT., If certificates of shares are deposited as security without any document of charge, it constitutes an equitable mortgage, and the banker has the right to apply to the Court for power to sell. In some cases a memo

randum of deposit is taken with certificates, and notice given to the company.

Some bankers take a blank transfer ; that is, a transfer with the space for the trans feree's name left blank, or it may be un dated. 1 f default is made in payment, the banker fills up the blanks and registers the shares in his own name or the names of nominees. The most satisfactory way, however, is to take a completed transfer of the shares and have them registered at once. When a transfer is taken it is usually accom panied by an agreement qualifying the transfer, and declaring that the transfer has been given merely by way of security.

In taking shares as a security, a banker will note whether they are fully paid up, or only partly paid, though certificates do not always show how much is paid up per share. If there is a large liability it would be unwise to register in the bank's name, or the names of its nominees. If the completed transfer is held, without registration, the owner will remain liable for any calls that may be made, and so long as the banker holds the certifi cate and transfer he has a security which he can complete by registration when required, and if notice has been given to the company it would be difficult for anyone to get registered in front of him. The com pany, however, may have a lien upon its shares for any debt due from the shareholder to the company. (See LIEN.) In most cases a certificate must be surrendered before a transfer of the shares can be effected, but this is not an absolute protection to a banker, as it has been held that a foot-note upon a certificate to the effect that no transfer of the shares will be effected with out production of the certificate does not constitute a contract and is not binding on the company. (See CERTIFICATE.) The Companies (Consolidation) Act, 1908, provides as follows :— " Section 22. (1) The shares or other interest of any member in a com pany shall be personal estate, trans ferable in manner provided by the articles of the company, and shall not be of the nature of real estate.

Page: 1 2