The person who subscribes to Memorandum and Articles of association of a company is known as promoter shareholder. However with the increase in operations fresh funds are needed which can be arranged through various methods of fundraising initiatives. In case the fund is being raised to bring capital to the company then change in shareholding pattern takes place. Other reasons could be transfer of shares, transmission of shares, buy back of shares. etc.
Authorised Capital of a company is the limit till which capital can be raised in a company. In case fresh shares are being issued and the authorised capital is already consumed, then first of all company has to increase its authorised capital to accommodate fresh allotment / Issue of shares. There is some nominal fee which has to be paid to the central government and stamp duty need to be paid on the increased share capital of the company.
In a private limited company shares can be allotted upto 200 persons without seeking any kind of approval from the government. However the existing shareholders have the first right to such fresh allotment / issue of shares. The shares can be allotted by the board of directors meeting. The return of allotment needs to be filed with the government of India within 15 days of such allotment. After allotment of shares the share certificate must be issued within 60 days.
Upon death of a shareholder of the company the legal heirs are entitled for transfer of shares in their name. However, in case the shareholder had nominated some other person then that other person is entitled for the shares. The transmission request must be presented to the company along with the court order or will which has been probated in the court.
Company can buy back its own shares from the shareholders against a consideration which should not be less that the valuation of shares. The consideration for such buy back must be paid from free general reserves. Thus only a profit making company can buy back its own shares. The consideration amount which has to be paid to the shareholders in a scheme of Buy-Back must be deposited in a separate bank account opened for this purpose only.