Write Comments on the following [BJS 1987]: (i) Transfer and transmission of shares (ii) Floating Charge (iii) Contribution by a Company to political parties

Question: Write Comments on the following [BJS 1987]:
(i) Transfer and transmission of shares
(ii) Floating Charge
(iii) Contribution by a Company to political parties

Find the question and answer of Company Law only on Legal Bites. [Write Comments on the following [BJS 1987]: (i) Transfer and transmission of shares (ii) Floating Charge (iii) Contribution by a Company to political parties]

Answer

(i) Transfer and transmission of shares

The transfer and transmission of shares refer to the process by which ownership of shares in a company is transferred from one person to another. This can occur in several ways, including the sale of shares, transfer as a gift, or by inheritance. The following are some key points to consider when discussing the transfer and transmission of shares:

Transfer of Shares: The transfer of shares refers to the sale or transfer of ownership of shares from one person to another. This can be done through a private sale, an initial public offering (IPO), or a secondary market transaction. The transfer of shares is governed by the laws and regulations of the country where the company is incorporated, as well as the company's articles of association.

Transmission of Shares: The transmission of shares refers to the transfer of ownership of shares from one person to another due to death, bankruptcy, or other circumstances. This can occur through inheritance, as a result of a will, or as a result of a court order. The transmission of shares is governed by the laws of the country where the company is incorporated, as well as the laws of inheritance and probate.

Formalities for Transfer of Shares: The formalities for the transfer of shares vary depending on the country and the company, but typically include the completion of a share transfer form, the payment of any transfer fees, and the presentation of evidence of ownership. In some cases, the transfer may also require the approval of the company's board of directors.

Formalities for Transmission of Shares: The formalities for the transmission of shares also vary depending on the country and the company, but typically include the presentation of a death certificate or other evidence of the transmission, and the payment of any transmission fees. In some cases, the transmission may also require the approval of the company's board of directors.

Electronic Transfer of Shares: Many countries now allow the electronic transfer of shares, which enables shares to be transferred quickly and efficiently. This can be done through electronic share registries, which keep records of ownership and allow shares to be transferred electronically.

The transfer and transmission of shares are important processes that enable the transfer of ownership of shares in a company from one person to another. The formalities for the transfer and transmission of shares vary depending on the country and the company, and the process can be facilitated through electronic transfer systems.

(ii) Floating Charge

A floating charge is a type of security interest that can be taken over a company's assets by a lender. Unlike a fixed charge, which is taken over specific assets, a floating charge covers a company's general assets, including its inventory, receivables, and other assets. The floating charge "floats" or moves over the assets of the company as they change over time, and is typically taken as security for a loan or other financial obligation.

The following are some key points to consider when discussing floating charges:

Creation of a Floating Charge: A floating charge is typically created when a company takes out a loan and agrees to grant the lender a security interest over its assets. The floating charge is documented in a floating charge agreement, which sets out the terms of the charge and the rights of the lender.

Priority of Floating Charge: In the event of the company's insolvency, the priority of floating charges will depend on the date of creation of the charge and the order in which it was registered. If there are multiple floating charges over the same assets, the charge that was created first and registered first will have priority over subsequent charges.

Conversion to Fixed Charge: A floating charge may be converted into a fixed charge if the lender believes that the company is no longer able to meet its obligations. This allows the lender to take control of the specific assets covered by the charge and sell them to repay the loan.

Crystallization of Floating Charge: The floating charge crystallizes, or becomes a fixed charge when the company is unable to meet its obligations and the lender takes steps to enforce the charge. This typically involves the appointment of a receiver or administrator, who takes control of the assets covered by the charge and sells them to repay the loan.

Role of Floating Charges in Insolvency: Floating charges play an important role in insolvency proceedings, as they allow lenders to recover their loans in the event of a company's insolvency. In many countries, floating charges are recognized as a form of security interest and are given priority over other creditors in the event of insolvency.

Floating charges are a type of security interest that can be taken over a company's assets to secure a loan or other financial obligation. Floating charges are recognized as a form of a security interest in many countries and are given priority over other creditors in the event of insolvency. Understanding the rights and responsibilities of floating charges is important for both lenders and borrowers, as well as for other stakeholders, such as receivers and administrators, who may be involved in insolvency proceedings.

(iii) Contribution by a Company to Political Parties

In most jurisdictions, there are laws that regulate the contributions that companies can make to political parties. The purpose of these laws is to ensure that companies do not unduly influence the political process or gain an unfair advantage over competitors.

The following are some key points to consider when discussing the contribution of a company to political parties:

Legal Restrictions: Companies are typically restricted from making direct contributions to political candidates or parties in order to prevent corruption and undue influence. In some jurisdictions, there may be limits on the amount of money that a company can donate to political parties or candidates. In other jurisdictions, contributions may be outright prohibited.

Transparency: Laws regulating company contributions to political parties often require that companies disclose the amount and nature of their contributions. This helps to ensure that the public is aware of the influence that companies have on the political process.

Consequences of Violating Restrictions: Companies that violate restrictions on political contributions may face penalties, including fines and sanctions. In some jurisdictions, individuals within the company may also face criminal charges.

Public Perception: Companies that make political contributions may face negative public perception, as the public may view their contributions as an attempt to influence the political process. This can lead to decreased trust in the company and damage to its reputation.

Conflict of Interest: Companies that make political contributions may also face questions about potential conflicts of interest, as they may be seen as attempting to influence the outcome of legislation that could benefit their business.

In India, contributions by companies to political parties are regulated by the Representation of the People Act, 1951 and the Companies Act, 2013.

The following are some key points to consider when discussing the contribution by a company to political parties in the Indian legal scenario:

Legal Restrictions: Under the Companies Act, 2013, companies are prohibited from making contributions to political parties that exceed 7.5% of their average net profits in the three immediately preceding financial years. In addition, companies are required to disclose the details of any political contributions in their annual reports.

Election Commission Guidelines: The Election Commission of India has also issued guidelines regarding political contributions by companies. These guidelines prohibit companies from making contributions to political parties in the form of cash and require that contributions be made by cheque or other banking instruments.

Political Donations by Foreign Companies: Foreign companies are prohibited from making contributions to political parties in India.

Consequences of Violating Restrictions: Companies that violate the restrictions on political contributions may face penalties, including fines and sanctions. In addition, individuals within the company may be subject to criminal charges.

Public Perception: Companies that make political contributions may face negative public perception, as the public may view their contributions as an attempt to influence the political process. This can lead to decreased trust in the company and damage to its reputation.

Contributions by companies to political parties in India are regulated by the Representation of the People Act, 1951 and the Companies Act, 2013. Foreign companies are prohibited from making contributions, and companies are required to disclose the details of any political contributions in their annual reports. Companies and their directors should carefully consider the implications of political contributions and comply with relevant laws and regulations.

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