[This article was originally published on June 21, 1999 in the leading financial daily, Financial Express. See the link below.]
In the case of a limited company having share capital, the Companies Act, 1956, [sub-section 13(4)] provides that the memorandum of association shall state the amount of share capital and the division thereof into shares of a fixed amount.
This fixed amount of each share, i.e., its denomination, represents the par value of a share. Secondly, this requires that the denomination of each share or the fixed amount must be stated in the memorandum in a monetary form. The Companies Act thus gives liberty to companies to fix the denomination of their shares. However, as per guidelines contained in a circular of 1983 issued by the Union government, the only denomination in which shares could be issued by a company was limited to Rs. 10 or Rs. 100. The Securities & Exchange Board of India (SEBI) has now modified these guidelines on June 11, 1999, imparting flexibility to firms to fix any denomination of the par value of its equity shares. This means that the companies are now free to issue shares of any denomination, e.g., Rs. 2 or Rs. 5,000. The only restriction as per the new SEBI guidelines now is that the denomination of shares cannot be less than Re 1 and that thereafter in multiples of Re 1. Moreover, at any given time there shall be only one denomination for all the shares of a company.
Read the full article in Financial Express.
