Shares

1. What each Tamarind share carries

Tamarind Advisory Ltd has 100 ordinary shares, one class, and no constitution. Meera holds 60. Ravi holds 40. Both have paid the issue price of Rs 1,000 a share.

A share is a share in the share capital of the company. Section 46 says what that interest is: movable property, which can be transferred and which can be given in pledge. The company’s land, equipment and cash remain the company’s property. That separation is the separate legal personality in the incorporation chapter.

Unless the constitution or the terms of issue lawfully provide otherwise, section 46 attaches three rights to every share:

1. one vote on a poll at a meeting of the company, on any resolution;
2. an equal share in dividends the board has authorised;
3. an equal share in the surplus assets of the company when those assets are distributed.

Meera’s 60 shares are 60 votes when a poll is taken. The right decides the weight of the share on that poll.

The dividend right is a share of dividends the board has authorised. It is not a right to compel a dividend. A dividend still has to meet section 63: it is paid out of retained earnings after accumulated losses, the solvency test must be met on payment, and payment is made within 12 months of declaration. The worked dividend and the certificate are in the company-file chapter.

The surplus right is the starting point when surplus assets are distributed. A later class can be placed ahead of it. That priority is a term of the class.

If nothing has been altered, every share carries the same three rights, and the holdings differ only by number. “Ordinary shares” and “preference shares” are names for classes. The next section is where a preference is created.

The register entry is the title

A share is issued when the holder’s name is entered on the share register (section 60). The people named in the incorporation application are treated as having been issued the shares stated there, and that still meets the register (section 51). A transfer takes effect by the same kind of entry (section 49). Subject to the Court’s power to rectify the register, the entry is prima facie evidence that legal title is in that person (section 93). The company may treat the registered shareholder as the person entitled to vote, to receive notices, to receive a distribution, and to exercise the other rights on the share.

The price being paid does not, by itself, issue the share or transfer it. The entry does.

A share certificate records the class and the number. A public company sends one within 28 days of issue or of registration of a transfer, unless the shares are held in an approved central depository (section 97). A shareholder in a company outside that duty may ask for a certificate. The certificate does not replace the entry. A statement of rights under section 84 must say, prominently, that it is not evidence of title.

No notice of a trust is entered on the share register (section 96). The beneficial-owner register is the separate record in the company-file chapter.

Companies Act, sections 46, 49, 51, 60, 63, 84, 93, 96 and 97. CBRD text, 15 May 2026.

2. Classes, par value, preference and redeemable shares

A class exists where the shares do not all carry the same rights. Subject to the constitution, the company may issue different classes (section 46). Shares in a class carry the same rights, privileges, limitations and conditions (section 114). Two holdings are the same class when those incidents match. They are different classes when the vote, the dividend, the surplus, the redemption, or a limitation differs.

Without limiting that power, shares may be redeemable, may confer preferential rights to distributions of capital or income, may confer special, limited or conditional voting rights, or may confer no voting rights (section 46).

If the shares confer rights other than the three defaults, or impose an obligation on the holder, the board approves the terms of issue. That approval needs a prior ordinary resolution of shareholders, unless the constitution provides otherwise, and it must meet section 114 where class rights are affected (section 52). The terms must be consistent with the constitution. Inconsistent terms are invalid. Consistent terms are treated as part of the constitution.

Preference is a place in the order of payment

A preference puts its holders ahead on income, on capital, or on both. The rate, whether unpaid dividends accumulate, and whether the shares also share in what remains, are terms of issue. A note that says “8 per cent preference shares” creates nothing until the constitution, or terms of issue approved under section 52, sets those terms.

While the preference dividend is being paid, the class may have no vote, a limited vote, or a vote that appears only when the dividend is in arrear. That too is a term. Section 46 would otherwise have given one vote on a poll.

Changing a class needs 75 per cent of that class

Where the capital is divided into classes, the company must not vary the rights of a class unless the variation is approved by special resolution of that class, or by the written consent of the holders of 75 per cent of the shares of that class (section 114). A resolution that reduces that class’s proportion of the votes, or its proportion of the dividends or distributions, is a variation even if the resolution does not use the word. Giving a vote to a class that had none can cut the other class’s proportion of the votes. Both classes can be affected.

A holder who did not consent and did not vote in favour may apply to the Court under section 178. The purchase right in section 108 is worked in the decisions chapter, for the constitutional restriction that section states in full. The company files particulars of the variation with the Registrar within one month.

Fractional shares exist only where the constitution provides for them. They carry the corresponding fraction of the rights and liabilities of a whole share of that class (section 54).

Shares without a par value

A par value is a nominal amount written on a share. Shares created or issued after the Act commenced are shares of no par value (section 47). Tamarind’s shares are in that group. Stated capital for that class is the total of amounts received or due and payable on the issue and on calls (section 7). The company keeps a stated capital account for each class and reduces it only as section 62 allows.

Par value remains possible in defined cases. An existing company that was already registered under the earlier companies legislation keeps the par value its shares had at commencement, until those shares are converted, and it may still issue par-value shares. The Registrar may permit a par-value class where a wholly owned subsidiary of a foreign company needs it for reporting abroad, or where there are good grounds.

For a par-value class, stated capital is the nominal paid-up value plus the share premiums that must go to the share premium account (section 7 and section 48). Stated capital is expressed in Mauritius currency unless the Registrar gives written approval to use another currency (section 48).

Redeemable shares

A company may issue a redeemable share only where section 76 is met.

• The constitution must provide for the issue of redeemable shares.
• The shares are fully paid at the time of redemption.
• The constitution or the terms of issue provide for redemption at the company’s option, at the holder’s option, or on a stated date, for a consideration that is specified, calculated by a formula, or fixed by a suitably qualified person who is not associated with the company.

Redemption at the company’s option is treated as an acquisition and as a distribution. Redemption at the holder’s option, or on a fixed date, is not a distribution for the dividend rules in sections 61 and 63, and it is treated as a distribution for the recovery rules in section 66. From the redemption date the former holder ranks as an unsecured creditor for the sum payable (sections 78, 79 and 80). A partly paid redeemable share cannot be redeemed.

Companies Act, sections 7, 46, 47, 48, 52, 54, 62, 66, 76, 78, 79, 80 and 114. Revised Laws text.

3. What the constitution can change

Tamarind need not have a constitution. With none, the Act supplies the rights and duties. With one, the Act remains in place except so far as the constitution lawfully restricts, limits or modifies it. A clause that contradicts the Act is void to that extent. Subject to the Act, the constitution is a contract between the company and each shareholder, and between the shareholders. Money payable under it is a debt due to the company.

That contract is why a share term has to be in the constitution, or in terms of issue that section 52 treats as part of the constitution. An email or a shareholders’ agreement that the constitution does not pick up may still bind the people who signed it. The board registers transfers under the Act and the constitution. The next buyer meets the share register. Which of those writings is the right one, and which rules a constitution cannot change, is worked in the constitution chapter.

Shareholders adopt, alter or revoke a constitution by special resolution, and the board gives the Registrar notice within 14 days. Section 105 requires that special resolution even if a constitution tried to use a lower majority. The constitution is certified by a law practitioner, a legal consultant or a law firm. It need not be a notarial deed.

Section 46 allows the three default rights to be restricted, limited, altered or added to by the constitution, or by the terms on which the share is issued, subject to the written-consent rule in section 59.

The constitution may	The Act still requires
Alter votes, dividends and surplus, and create classes	A contradiction of the Act is void
Set aside the offer to existing holders on a new issue. That offer applies subject to the constitution	The board must still fix consideration that is fair and reasonable to the company and to all existing shareholders (section 56)
Limit transfer. A private company may modify the Second Schedule to the extent the Act permits, including its transfer pre-emption	The instrument of transfer follows section 87, which applies notwithstanding the constitution
Provide for redeemable shares	The share is fully paid at redemption, and the price mechanics are in the constitution or the terms
Set the call and forfeiture procedure in place of the Fourth Schedule	An issue that increases a person’s liability, or imposes a new one, is void unless that person consents in writing beforehand (section 59)
Add an express liability of a shareholder to the company	A later alteration that forces a shareholder to take more shares, or that increases that shareholder’s liability to the company, binds that shareholder only with written agreement (section 102)
Provide a lien, including, for a company that is not public, a lien over fully paid shares	A public company does not receive that fully-paid lien from section 85

The Second Schedule is the model constitution for a private company. Its opening words allow the company to exclude or modify any provision of the Schedule to the extent the Act permits. Removing the transfer pre-emption is a modification the Schedule allows. Removing section 56, section 59 or section 87 is not.

A unanimous shareholder agreement, and the Global Business lists

A private company may use a unanimous shareholder agreement under section 272. The Eleventh Schedule lists sections that then do not apply. On shares, that list includes section 52, section 63, section 69, sections 78, 79 and 80 in the respects the Schedule states, and section 81. Section 46, section 55, section 87, section 101 and section 114 still apply. A class right still has to be written into the constitution.

A company holding a Global Business Licence, or an Authorised Company, may issue shares with or without a par value notwithstanding section 47, provided that all the ordinary shares, or all the preference shares, consist of one kind or the other. Par-value shares of that company may be stated in more than one currency, and stated capital need not be in Mauritius currency. For a Global Business Licence holder, redeemable shares may be issued unless the constitution forbids them. An Authorised Company’s constitution must provide for that issue. The Thirteenth Schedule disapplies named sections for both, including section 83 and the 30 days’ public notice in section 62. An Authorised Company is also outside the non-cash certificate in section 57. The 15 per cent cap on shares a company holds in itself does not apply to a private company in either of those positions. Section 46, the register and section 114 still apply. The directors chapter explains what those permissions are.

Companies Act, sections 55, 57, 62, 81, 83 and 272; Eleventh Schedule and Thirteenth Schedule.

Companies Act, sections 39, 40, 41, 43, 44, 46, 49, 52, 56, 59, 85, 87, 100, 101, 102 and 105; Second Schedule.

4. Paid and unpaid shares

Before any issue, the board determines the consideration and must ensure it is fair and reasonable to the company and to all existing shareholders (section 56). The consideration may be cash, a promissory note, a contract for future services, property, or other securities of the company. A par-value share, where one is permitted, is not issued for less than par.

Shares count as paid for in cash only to the extent the company has actually received cash when it agrees to issue them, or afterwards (section 57). Where shares already issued are credited as paid otherwise than for cash, the board fixes the reasonable present cash value, records it in a director’s certificate, and delivers that certificate to the Registrar within 14 days.

The issue price and a call are different debts

Subject to the constitution, a shareholder is not liable for the company’s obligations merely by being a shareholder. Liability to the company is limited to the amount unpaid on the share, a deemed-director exposure, a recoverable distribution, a liability the constitution expressly provides, and calls (section 100). A separate contract, a delict, a breach of a duty owed to the company, and the position in an unlimited company sit outside that limit.

Section 101 then splits what “unpaid” can mean.

• A call, or another liability the share imposes on its holder, attaches to the current holder, including where it fell due before that holder was registered.
• Where part of the consideration for the issue remains unpaid, and the person to whom the share was issued no longer holds it, that unpaid issue price stays with the original allottee, or with anyone who assumed it at issue. It does not pass to the next holder.

At Tamarind, Meera takes one further ordinary share issued for Rs 1,000. The company receives Rs 400. The other Rs 600 of the issue price is unpaid. She then transfers that share to Ravi, and Ravi is entered on the register. Ravi is the shareholder. The unpaid Rs 600 remains Meera’s debt. It does not become Ravi’s because his name is now on the register.

On a different share, already held by Ravi, the terms left Rs 200 unpaid and payable when the board calls. The board calls it. That call attaches to Ravi, the holder for the time being. The company gives the Registrar notice within 14 days of the amount and of the stated capital that follows (section 58).

The issue of a share that increases a person’s liability to the company, or imposes a new one, is void unless that person, or an agent authorised in writing, consents in writing before the share is issued (section 59).

The notice before forfeiture

Subject to the constitution, calls and forfeiture follow the Fourth Schedule.

The shareholder must have at least 14 days’ written notice of the time and place of payment. A late call carries interest from the due time until payment, at a rate the board sets, not exceeding 10 per cent a year. The board may waive that interest. Joint holders are jointly and severally liable. An amount the terms make payable on issue or at a fixed time is treated as a call already made.

If the call is missed, the board may serve a further notice requiring payment of the unpaid amount and any interest. That notice names a day not earlier than 14 days after service, and it states that the shares may be forfeited. If the notice is not met, the board may forfeit by resolution, at any time before payment. The person ceases to be the shareholder of that share and remains liable for the amounts payable at forfeiture until the company receives payment in full. A forfeited share may be sold. If it is sold within 12 months, the residue after costs and the amounts owing is paid to the person whose share was forfeited.

If Ravi does not pay the Rs 200 call, the board may serve that second notice and then forfeit. He ceases to be the holder of that share and remains liable for the amount payable at forfeiture until Tamarind is paid in full. The constitution could have set a different call procedure. It cannot skip the consent in section 59 if what is really happening is the issue of a new liability he never accepted.

A company has a lien, where the constitution provides, over every share that is not fully paid, for money called or payable at a fixed time on that share (section 85). A company that is not public may, where the constitution provides, extend a lien to fully paid shares for money the shareholder owes the company. The directors may sell after the sum is payable and 14 days’ written demand has expired.

The dividend follows the amount paid

The board must not authorise a dividend on some shares in a class and not others, or a larger dividend on some shares of the class than on others, except in two cases: the dividend is reduced in proportion to a liability attached to the shares under the constitution, or the shareholder has agreed in writing to take none, or less (section 63). Where the Second Schedule is in the constitution, dividends are paid according to the amounts paid or credited as paid on the shares. An amount paid in advance of calls is ignored. The directors may deduct from a dividend any sum the shareholder presently owes the company on calls.

A subdivision or consolidation must keep the proportion between the amount paid and the amount unpaid (section 53). Splitting a partly paid share into two does not remove the unpaid part.

Companies Act, sections 53, 56, 57, 58, 59, 63, 85, 100 and 101; Fourth Schedule.

5. How a transfer works

Subject to any limitation in the constitution, a share is transferable (section 49). The transfer is the entry in the share register. The steps below are what has to happen before that entry.

The heir of a deceased shareholder, or the Curator, may transfer even though that person is not yet the registered shareholder. The directors may require evidence of that title before they enter the transfer.

The instrument

Section 87 applies notwithstanding the constitution. The company enters the transfer when a valid instrument has been delivered. If the company directly or indirectly holds freehold or leasehold immovable property, the instrument is the form required by the Registration Duty Act section 24. In any other case, the instrument is the form approved by the Registrar. The company files a certified copy with the Registrar. Securities traded on a securities exchange are outside that rule. On the transferor’s written request, the company enters the transferee as if the transferee had applied (section 88).

Where shares are issued or transferred to a non-citizen, the board must, notwithstanding the constitution, ascertain that the non-citizen has the certificate under the Non-Citizens (Property Restriction) Act before the shares are issued or the transfer is entered (section 52). A constitution clause cannot waive that step.

If the company refuses to register a transfer, it sends notice of the refusal to the transferor and the transferee within 28 days of delivery. A public company states the reasons in that notice (section 89).

Pre-emption on a transfer

Where a private company adopts the Second Schedule and does not modify the transfer paragraph, no share is sold or transferred until that pre-emption is exhausted. It is an offer to the people who are already shareholders, before any outsider.

1. The holder gives the board written notice. A notice covering several shares is one notice. The holder need not sell only some of them. The notice is irrevocable and appoints the board as agent to sell.
2. The price is the price agreed with the board or, if they do not agree within 28 days, a fair price certified by a person they jointly appoint. Failing that appointment, either party may ask the Judge in Chambers to appoint an arbitrator.
3. The board offers the shares to the other shareholders, stating the number and the price. Each has 21 days to say whether, and how many, they will buy. The board apportions the shares pro rata, and no shareholder is obliged to take more than the maximum they stated.
4. On payment, the seller transfers. If the seller defaults, the board may receive the price and enter the buyers on the register.
5. Where the shares remain unsold at the end of the 60 days stated in the Schedule, the seller has a further 30 days to sell the shares that were not taken, but not a portion only, to a person who is not a shareholder, at not less than the price offered to the shareholders.

A holder may transfer to a spouse, father, mother, child, grandchild, son-in-law or daughter-in-law, or to trustees for any of them, without those five steps. The board may still refuse registration on the grounds in the next paragraph of the Schedule.

The board may refuse or delay registration, subject to sections 87, 88 and 89, where the law requires it, where the transferee would take on a liability and has not signed, where an amount payable on the share is in default, where the transferee is a minor or of unsound mind, where the transferor’s right is not proved, where the pre-emption has not been followed, or where the board in good faith decides that registration would not be in the best interests of the company or any of its shareholders.

Tamarind has no constitution, so this pre-emption is not in force. Meera can transfer, and she still needs the instrument and the register entry. A public company does not pick up the Second Schedule by default. Its restrictions are the ones its own constitution lawfully contains, plus the Act’s instrument and refusal rules.

Section 55 is a different offer. It applies when the company issues new shares that rank equally with, or in priority to, existing shares as to voting or distribution rights. Those new shares are offered to existing holders in a way that would preserve their relative voting and distribution rights. The offer stays open for at least 14 days. Section 55 applies subject to the constitution. It is an offer on a new issue. The Second Schedule pre-emption is an offer on a transfer of shares already in issue.

A pledge leaves the shareholder on the register

Any share may be given in pledge (section 86). The company keeps a register in which the pledge is inscribed, stating that the pledgee holds otherwise than as owner. That inscription proves the pledge. It does not make the pledgee the shareholder. The pledgor remains the person the company may treat as entitled to vote and to the dividend, until a transfer is entered.

A purchase by the company

A transfer to a buyer and a purchase by the company are different acts. The company acquires its own shares only on the paths in section 68, including sections 69 and 70 and section 108, a unanimous approval available to a private company, a unanimous resolution, or a Court order. There must still be shares in issue other than convertible or redeemable shares. The constitution must authorise a purchase under section 69. The board must be satisfied about the company’s interest, fairness, solvency immediately after the acquisition, and the information given to shareholders.

Acquired shares are cancelled unless the constitution expressly permits the company to hold them, the board resolves that they not be cancelled, and the holding stays within 15 per cent of the class previously issued (section 72). While the company holds a share in itself, the rights on it are suspended: no vote and no distribution (section 73).

Financial assistance for the acquisition of the company’s own shares needs a prior board resolution on the company’s interest, on fairness to shareholders who do not receive the assistance, and on solvency immediately afterwards (section 81). Where the assistance, together with other assistance still outstanding, exceeds 10 per cent of stated capital, an auditor’s certificate is required first. A distribution already approved under section 61, an issue, a repurchase or redemption, a compromise, and lending in the ordinary course of a lending business are outside that prohibition (section 82).

An issue or transfer of the holding company’s shares to its subsidiary is void (section 83).

Companies Act, sections 49, 52, 55, 68, 69, 70, 72, 73, 81, 82, 83, 86, 87, 88, 89 and 108; Second Schedule.

6. Equal ranking inside a class

Meera holds 60 shares and Ravi holds 40. Both holdings are fully paid and in the same class. The board authorises a dividend of Rs 1,000 on that class, after the solvency test and the retained-earnings condition have been met. Section 46 gives each share an equal share in that dividend. Section 63 stops the board paying some shares of the class and not others, or paying some of them more, apart from a reduction in proportion to a liability attached under the constitution, or a written waiver.

Meera’s 60 shares are 60 per cent of the class. She receives Rs 600. Ravi’s 40 shares are 40 per cent. He receives Rs 400. The same arithmetic applies to a distribution of surplus assets of that class, unless a preference class has been placed ahead of it by its terms.

The market name for that equal ranking is pari passu. The Act does not use the phrase. Section 55 uses its own words: shares that rank equally with, or in priority to, existing shares as to voting or distribution rights. Equal ranking and priority are the two positions that section already distinguishes.

Inside one class, with the same amount paid, the shares rank equally on a dividend the board has authorised and on a distribution of surplus. A new issue that will rank equally with those shares, or ahead of them, is first offered to the existing holders so that their relative voting and distribution rights can be preserved, unless the constitution sets section 55 aside. The offer stays open for at least 14 days.

On a winding up, if the Second Schedule is adopted and not modified, surplus assets go to the shareholders in proportion to their shareholding. A holder of shares that are not fully paid receives only a proportionate share of that entitlement.

A preference class is paid according to its terms, ahead of the ordinary shares on the rights those terms give it. What remains, if the preference does not participate, belongs to the other class.

Where the dividend is reduced in proportion to a liability attached to the share, or where the Second Schedule’s dividend paragraph is in the constitution, the shares can still be one class and the cash can differ. If Meera’s shares are fully paid and Ravi’s are half paid, Meera’s shares take the larger amount per share.

A resolution that cuts one group’s proportion of the votes, or of the distributions, is a variation of that class. It needs the class approval in section 114.

Companies Act, sections 46, 52, 55, 63 and 114; Second Schedule.

7. A right to sell on the same terms

A minority holder may want to leave when a majority holder sells, on the same price and the same terms, rather than being left in a company she no longer chose. Market practice calls that a tag-along. The Act does not confer it. The right affects registration when the constitution creates it, or when terms of issue that section 52 treats as part of the constitution create it.

What the Act does confer, if the Second Schedule is adopted and the transfer paragraph is left alone, is the opposite direction. The seller must offer the shares to the other shareholders first. Ravi may buy Meera’s shares. He is not given a right to sell his shares to Meera’s buyer.

Section 49 allows the constitution to limit transfer. The constitution may contain the matters the Act contemplates and such other matters as the company wishes to include. Section 43 makes that constitution the contract with the company and between the members, and voids it where it contradicts the Act. A right to join a sale, if it is meant to affect registration, is written into the constitution, or into terms of issue that section 52 treats as part of the constitution.

An email that the constitution does not pick up can still be a contract between the people who signed it. Ravi may then have a personal claim against Meera. The board does not take its registration instructions from that email. The buyer is entered on the register only if the Act and the constitution allow that entry.

The Act supplies no trigger, no election period and no price formula for this right. The constitution has to. A workable clause states whose sale triggers the right, which of the minority shares may join, the price, the period in which the minority elects and what silence means, and who signs the instrument if the minority elects.

Leave the Second Schedule pre-emption unmodified and the two regimes meet. Meera’s sale of her own shares is offered to Ravi first. If he declines, and the Schedule’s outside-sale window then opens, Meera may sell to Asha, who is not a shareholder. Ravi’s wish to put his own shares into that sale is a second transfer. His shares face the pre-emption again. A clause that lets the minority leave with the buyer modifies the pre-emption to the extent the Act permits, so that this particular sale is not offered round the table again, and so that the minority’s election is part of the same transfer.

The rest of the transfer machinery stays. There is still a valid instrument under section 87 and an entry under section 49. If Asha is a non-citizen, section 52 still stops the transfer until the board has ascertained the required certificate. If the clause lets some shares of a class leave on terms that cut the others’ proportion of votes or distributions, section 114 treats that as a variation and requires the class approval.

Companies Act, sections 42, 43, 49, 52, 87 and 114; Second Schedule.

8. A duty to sell when the majority sells

A buyer will purchase only if she acquires every share. The majority is willing. The minority would rather stay. Market practice calls the majority’s power to require the sale a drag-along. It is a duty on the minority to transfer shares they already hold. It is a different arrangement from the right in the previous section.

The Act does not set the percentage that may compel the sale. A constitution that uses 75 per cent is using the figure already used for a special resolution and for class consent. The duty exists when the constitution imposes it.

Section 49 allows the constitution to limit transfer. A clause that says the holders of a stated majority may accept an offer for every share, and every other holder then transfers on the same price and the same terms, is such a limitation. Put into the constitution by special resolution, it is part of the section 43 contract. The Second Schedule already appoints the board as agent to sell in the pre-emption. A duty-to-sell clause can appoint the board, or a named person, as agent to sign the instrument for a holder who does not sign. Section 88 then lets the company enter the transferee on the transferor’s request, which the agent can give.

Section 87 still requires the statutory instrument. Section 93 still treats the register as title. Section 52 still applies to a non-citizen buyer. The refusal grounds in the Second Schedule can still apply if they have been left in place. A transfer that is meant to complete for the buyer therefore modifies the pre-emption to the extent the Act permits.

Section 102 and a larger holding

Section 102 is about an alteration of the constitution. A shareholder is not bound by an alteration that requires him or her to acquire or hold more shares than he or she held on the date of the alteration, or that increases his or her liability to the company, unless he or she agrees in writing.

A duty to transfer shares already held leaves the size of the holding as it was. Section 102’s first limb, the ban on forcing a shareholder to take more shares, does not catch that transfer. Section 102 does apply if the same alteration increases the shareholder’s liability to the company: a new sum payable to the company, a guarantee in favour of the company, or a call the shareholder had not already accepted. That part binds only with that shareholder’s written agreement. Warranties given only to the buyer are a matter between those parties. A liability to the company is a sum, guarantee or call owed to the company.

Section 59 is the matching rule on an issue. A share that increases or imposes a liability is void unless the person consents in writing before issue. This clause transfers a share the holder already has. It does not issue a new one.

Section 108 and a purchase by the company

Section 108 lets a shareholder who voted against certain special resolutions require the company to purchase his or her shares. The buyer there is the company. A duty to sell sends the shares to an outside buyer because the constitution says so. The two procedures are different.

If every share is bought on the same price and the same terms, the rights attached to the shares travel with the shares. If the offer pays one class a different price, or removes a right as the price of the sale, section 114 can treat the resolution as a variation of that class. The class approval is then required as well as the special resolution that amends the constitution.

Companies Act, sections 43, 49, 52, 59, 87, 88, 93, 102, 108 and 114; Second Schedule.

9. Five situations

One class, and no constitution

Tamarind is as this chapter began: Meera 60 shares, Ravi 40, and no constitution. Each share carries one vote on a poll, an equal share of any dividend the board authorises, and an equal share of surplus. A dividend of Rs 1,000 on the class, properly authorised, is Rs 600 to Meera and Rs 400 to Ravi.

The board later wants to issue 20 shares to Meera’s brother, ranking equally on votes and dividends. There is no constitution to set section 55 aside, so those shares are first offered to Meera and Ravi in a way that would preserve their relative voting and distribution rights. The offer stays open for at least 14 days.

Meera can transfer. With no constitution, the Second Schedule’s transfer pre-emption is not in force. She still needs a valid instrument and an entry in the register. The buyer becomes the shareholder when the register says so.

A preference class that can be redeemed

The shareholders adopt a constitution by special resolution. A law practitioner certifies it. The board gives the Registrar notice within 14 days.

The constitution creates a second class: 1,000 shares with a preferential right to a stated dividend, no vote while that dividend is paid, and redemption at the company’s option five years after issue for a specified price. These are not the three default rights. The board approves the terms of issue after an ordinary resolution, unless the constitution has already provided otherwise. The terms must match the constitution or they are invalid.

The constitution must provide for redeemable shares. It does. The shares still have to be fully paid at the moment of redemption, and the price has to be the specified price the terms already fix.

Two years later the board wants to give the preference shares a vote. That changes rights attached to the class, and a resolution which cuts the ordinary holders’ proportion of the votes can also be a variation of the ordinary class. Each affected class needs a special resolution or the written consent of the holders of 75 per cent of that class. A holder of the class who did not agree may go to the Court or require a purchase by the company under section 108.

The unpaid issue price, then a call

The Rs 600 and the Rs 200 in section 4 are this situation in numbers. Ravi’s name on the register makes him the shareholder of the share Meera transferred. It does not move the unpaid issue price. The later call on his own share does travel with the register, and the forfeiture notice is a second 14-day notice after the call notice.

Pre-emption, and an email

The constitution now includes the Second Schedule without modifying the transfer pre-emption. Meera wants to sell all 60 of her shares to Asha, who is not a shareholder.

She gives the board a transfer notice. It is irrevocable. The price is agreed, or a fair price is certified. The board offers the shares to Ravi. He has 21 days. If he takes them, Meera transfers to him on payment. That is pre-emption: Ravi may buy. He is not invited to sell. If the shares remain unsold through the 60-day period, Meera has a further 30 days to sell all of them, not a portion, to Asha at not less than that price. The board may still refuse registration on a Schedule ground, including a good-faith decision that registration is not in the best interests of the company or any shareholder. A refusal notice goes to Meera and Asha within 28 days.

The same morning Meera emails Ravi that he may sell his shares to Asha on the same terms if her sale completes. The email is not the constitution, so it is not the contract that tells the board whether the pre-emption has been satisfied. Ravi may have a personal claim against Meera if the email is a contract between them. His own shares, if he wants them to move, are a separate transfer and face the pre-emption themselves. Asha is entered only if the Act and the constitution allow the entry.

A transfer to Meera’s child would have skipped the five pre-emption steps. The board’s refusal grounds would still have applied.

A duty to sell, written into the constitution

The shareholders amend the constitution. They may modify the Second Schedule pre-emption to the extent the Act permits. The new clause says: if a buyer offers to purchase every share, and the holders of 75 per cent of the voting shares accept, every other holder must transfer on the same price and the same terms, and the board may sign the instrument as agent.

That 75 per cent is the figure the shareholders chose. The Act does not supply a percentage for this duty. The clause is a limitation on transfer and part of the constitution contract. It still needs a valid instrument and an entry on the register. The buyer is the outside purchaser named in the offer. Section 108, a purchase by the company, is a different procedure. The clause transfers shares the holder already has. If the same amendment increased a shareholder’s liability to the company, section 102 would require that shareholder’s written agreement. If the price differed by class, section 114 would require that class’s approval as well.

Companies Act, sections 46, 49, 52, 55, 63, 76, 87, 89, 93, 101, 102, 108 and 114; Second and Fourth Schedules.

What you should now be able to explain

A Tamarind share carries three default rights, and the register entry is the title. A class, a preference and a redemption are set in the constitution or in the terms of issue. The unpaid issue price can stay with Meera after Ravi is registered. Equal ranking follows section 46. A minority right to join a sale, and a majority power to require a sale, exist when the constitution creates them.

The directors who authorise a dividend are the directors in the previous chapter. The certificate and the solvency test are in the company-file chapter. The next chapter follows an issue of further shares, a buy-back, and a loan to fund the purchase. The case studies put a longer set of company facts in front of those rules.