The sections, word for word
Every section on this subject, exactly as printed in the Official Gazette (Act No. 3 of 2020). The explanation follows beneath.
Section 154. Return as to allotment
(1) Whenever a company limited by shares makes any allotment of its shares, the company shall within one month thereafter deliver to the Commission for registration—
(a) a return of the allotments in the prescribed form, stating—
(i) the number and nominal value of the shares comprised in the allotment,
(ii) the names, addresses and description of the allottees, and
(iii) the amount, if any, paid or due and payable on each share, whether on account of the nominal value of the shares or by way of any premium payable in relation to such shares ;
(b) in the case of shares allotted as fully or partly paid up otherwise than in cash—
(i) a contract in writing, constituting the title of the allottee to the allotment together with any contract of sale, or for services or other consideration in respect of which that allotment was made, such contracts being duly stamped,
(ii) a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted, and
(iii) with respect to public companies, particulars of the valuation of the consideration in accordance with section 162 ; and
(c) such other documents and particulars as may be required by the Commission, but where the Commission requires that additional documents or particulars be submitted it shall grant the company additional time of at least seven days within which to provide the additional documents and particulars, and the additional time granted is deemed to be an extension of the one month period in subsection (1).
(2) If default is made in complying with this section, each officer of the company is liable to such penalty as the Commission shall specify in the regulation for every day during which the default continues.
(3) In case of default in delivering to the Commission within one month after the allotment any document required to be delivered by this section, the company or any officer liable for the default, may apply to the court for relief, and the court, if satisfied that the omission to deliver the document was accidental or due to inadvertence or that it is just and equitable to grant relief, may make an order extending the time for the delivery of the document for such period as the Court may consider proper.
Section 155. Prohibition of payments of commissions, discounts out of shares and capital
(1) Except as provided in section 156, no company shall apply any of its shares or capital money either directly or indirectly in payment of any commission, discount or allowance to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any share in the company, or procuring or agreeing to procure subscriptions, whether absolute or conditional, for any share in the company, whether the shares or capital money are so applied by being added to the purchase money of any property acquired by the company or to the contract price of any work to be executed for the company, or any such money is paid out of the nominal purchase money or contract price, or otherwise.
(2) Nothing in this section affects the payment of any brokerage or agency fees agreed between the company and a broker or agent of the company, for services provided by such broker or agent in connection with the raising of the capital by the company.
(3) A vendor to, promoter of, or other person who receives payment in money or shares from a company, shall have and is deemed always to have had power to apply any part of the money or shares so received in payment of any commission, the payment of which, if made directly by the company, would have been legal under this section.
Section 156. Power to pay commission in certain cases
(1) A company may pay a commission to any person in consideration of his subscribing or agreeing to subscribe, whether absolutely or conditionally, for any share in the company or procuring or agreeing to procure subscription, whether absolute or conditional, for any share in the company if—
(a) the payment of the commission is authorised by the articles ;
(b) the commission paid or agreed to be paid does not exceed 10% of the price at which the shares are issued or the amount or rate authorised by the articles, whichever is lesser ;
(c) the amount or rate per cent of the commission paid or agreed to be paid is—
(i) in the case of shares offered to the public for subscription, disclosed in the prospectus, or
(ii) in the case of shares not offered to the public for subscription, disclosed in the statement in lieu of prospectus, or in a statement in the prescribed form signed in like manner as a statement in lieu of prospectus, and delivered to the Commission for registration before the payment of the commission, and where a circular or notice, not being a prospectus inviting subscription for the shares is issued, also disclosed in that circular or notice ; and
(d) the number of shares which persons have agreed for a commission to subscribe absolutely is disclosed in the manner specified in this section.
(2) If default is made in delivering any document required to be delivered to the Commission under this section, the company and every officer in default is liable to such penalty as the Commission shall specify in the regulation.
Section 157. Statement in balance sheet as to commission
(1) Where a company has paid any amount by way of commission in respect of any shares in the company, the amount so paid or so much of it as has not been written off, shall be stated in every balance sheet of the company until the whole amount has been written off.
(2) If default is made in complying with this section, the company and every officer of the company is liable to such penalty as the Commission shall specify by regulation for every day during which the default continues.
Section 158. Call on shares
(1) Subject to the terms of the issue of the shares and of the articles, the directors may make calls upon the members in respect of any money unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment of the shares made payable at fixed times : Provided that no call shall exceed one fourth of the nominal value of the share or be payable at less than one month from the date fixed for the payment of the last preceding call, and each member shall (subject to receiving at least 14 days’ notice specifying the time or times and place of payment) pay to the company at the time or times and place so specified the amount called on his shares, so however that a call may be revoked or postponed as the directors may determine.
(2) A call is deemed to have been made at the time when the resolution of the directors authorising the call was passed, and may be required to be paid by instalments.
(3) The joint holders of a share are jointly liable to pay all calls in respect of the share.
(4) If a sum called in respect of a share is not paid before or on the day appointed for payment, the person from whom the sum is due shall pay interest on the sum from the day appointed for payment to the time of actual payment at such rate not exceeding the current bank rate per annum, as the directors may determine, but the directors are at liberty to waive payment of such interest wholly or in part.
(5) A sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the shares or by way of premium shall, for the purposes of these provisions, is deemed to be a call duly made and payable on the date on which by the terms of issue the same becomes payable, and in case of non- payment, all the relevant provisions of this Act as to payment of interest and expenses, forfeiture or otherwise apply as if such sum had become payable by virtue of a call duly made and notified.
(6) The directors may, if they think fit, receive from any member willing to advance the same, all or any part of the money uncalled and unpaid upon any share held by him, and upon all or any of the money so advanced may (until the same would, but for such advance, become payable) pay interest at such rate not exceeding the current bank rate per annum as may be agreed upon between the directors and the member paying such sum in advance (unless the company in general meeting otherwise directs).
Section 159. Reserve liability of company having share capital
A company limited by shares may, by special resolution determine that any portion of its share capital which has not been already called up are not capable of being called up except in the event and for the purposes of the company being wound up and thereupon, that portion of its share capital shall not be capable of being called up, except in the event and for the purposes specified in this section.
Section 160. Payment for shares
Subject to the provisions of sections 161 and 162, the shares of a company and any premium on them shall be paid up in cash, or where the articles so permit, by a valuable consideration other than cash or partly in cash and partly by a valuable consideration other than cash.
Section 161. Meaning of payment in cash
(1) Shares are not deemed to have been paid for in cash except to the extent that the company shall have actually received cash for them at the time of, or subsequently to, the agreement to issue the shares.
(2) Where shares are issued to a person who has sold or agreed to sell property or rendered or agreed to render services to the company or to persons nominated by him, the amount of any payment made for the property or services shall be deducted from the amount of any cash payment made for the shares and only the balance (if any) shall be treated as having been paid in cash for such shares notwithstanding any exchange of cheques or other securities for money.
Section 162. Payment for shares of public companies other than in cash
(1) Where a public company agrees to accept payment for its shares otherwise than wholly in cash, it shall appoint an independent valuer who shall determine the true value of the consideration other than cash and prepare and submit to the company a report on the value of the consideration.
(2) The valuer is entitled to require from the officers of the company such information and explanation as he thinks necessary to enable him to carry out the valuation or make the report under subsection (1).
(3) The company shall, not more than three days after it receives the valuer’s report, send a copy of the report to the proposed purchaser of shares, and indicate to the proposed purchaser whether or not it intends to accept the consideration as payment or part payment for its shares.
(4) A public company shall not accept as payment or part payment for its shares consideration other than cash unless the cash value of the consideration as determined by the valuer is worth at least as much as may be credited as paid up in respect of the shares allowed to the proposed purchaser.
(5) A valuer who, in his report or otherwise, knowingly or recklessly makes a statement which is misleading, false or deceptive in a material particular, commits an offence and is liable to imprisonment for a term of 12 months or a fine as shall be imposed by the court, or both.
(6) For the purposes of this section, “valuer” means an auditor, a valuer, surveyor, an engineer or accountant not being a person in the employment of the company nor an agent or associate of the company or any of its directors or officers.
Section 163. Power to pay different amounts on shares
Where it is authorised by its articles, a company may—
(a) make arrangements on the issue of shares for a difference between the shareholders in the amounts and times of payment of calls on their shares ;
(b) accept from any member the whole or a part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up ; or
(c) pay dividends in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.
What this means
Amended since the gazette
Section 154(1) now requires the return of allotment within 15 days, not one month, under the Business Facilitation Act 2023. See all the amendments.
Short answer
After an allotment, a company limited by shares must file a return of allotment with the Commission (section 154). Directors can call up unpaid share money but a call cannot exceed one quarter of the nominal value, needs at least 14 days’ notice and must be at least a month after the last call (section 158). A public company that takes non-cash payment for shares needs an independent valuation (section 162).
Return of allotment
Under the gazetted text, a company limited by shares delivered to the Commission within one month of any allotment (the 2023 amendment shortened this to 15 days):
- a return in the prescribed form giving the number and nominal value of the shares, the names, addresses and description of the allottees, and the amount paid or due on each share;
- for shares issued fully or partly paid other than in cash, the written contract that gives the allottee his title and any contract of sale or services, duly stamped, with a return of the extent to which the shares count as paid up and the consideration (and, for public companies, particulars of the valuation under section 162); and
- any other documents the Commission requires, in which case it must give at least seven more days (section 154(1)).
Each officer in default is liable to a daily penalty set by the Commission, and the company or an officer can ask the court to extend time if the omission was accidental or inadvertent (section 154(2) and (3)). A director who knowingly contravenes the allotment rules is liable to compensate the company and the allottee, but a claim must start within two years of the allotment (section 153(2)).
Commissions on shares
A company cannot apply its shares or capital money, directly or indirectly, to pay a commission, discount or allowance to anyone for subscribing, or procuring subscriptions, for its shares. Brokerage or agency fees for raising capital are not affected (section 155). A company may pay a commission if the articles authorise it, it does not exceed 10% of the issue price (or the lower rate in the articles), the rate is disclosed in the prospectus or a statement lodged with the Commission before payment, and the number of shares firmly subscribed for a commission is disclosed (section 156). Any unwritten-off commission is shown in every balance sheet (section 157).
Calls on partly paid shares
- Subject to the terms of issue and the articles, directors can make calls on money unpaid on shares, but no call can exceed one quarter of the nominal value or fall due less than a month after the previous call. Each member must get at least 14 days’ notice of when and where to pay (section 158(1)).
- A call is treated as made when the directors’ resolution is passed, and can be paid by instalments. Joint holders are jointly liable (section 158(2) and (3)).
- Interest runs on unpaid calls at a rate set by the directors, up to the current bank rate, and the directors can waive it. A sum due on allotment or at a fixed date under the terms of issue counts as a call (section 158(4) and (5)).
- The directors can accept advance payments of uncalled money, and pay interest up to the bank rate (section 158(6)).
- A company limited by shares can by special resolution decide that part of its uncalled capital can be called only on a winding up (section 159).
Paying for shares
Shares and any premium are paid in cash or, if the articles permit, by valuable consideration other than cash, or partly in cash (section 160). Shares count as paid in cash only to the extent the company has actually received cash. If shares go to someone who sold property or rendered services to the company, the price of that property or those services is deducted from the cash payment (section 161).
A public company that accepts payment other than wholly in cash must appoint an independent valuer to value the consideration and report. It sends the report to the proposed purchaser within three days and cannot accept the consideration unless its cash value is at least equal to the amount credited as paid up. A valuer who knowingly or recklessly makes a misleading statement commits an offence punishable by 12 months’ imprisonment or a fine (section 162). Where the articles allow, a company can also charge different members different amounts or times for calls, accept payment in advance of calls, and pay dividends in proportion to the amount paid up (section 163).
Questions and answers
When must a return of allotment be filed?
Within 15 days of the allotment, since the 2023 amendment to section 154(1). The gazetted text said one month.
How much can directors call on a share at one time?
No more than one quarter of the nominal value, and not less than a month after the last call, with at least 14 days’ notice (section 158(1)).
Can a company pay a commission to people who subscribe for its shares?
Only if the articles authorise it, it does not exceed 10% of the issue price, and the rate is disclosed as the Act requires (section 156).
Can a public company accept property instead of cash for shares?
Only if the articles permit and an independent valuer confirms the cash value is at least equal to the amount credited as paid up (sections 160 and 162).
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