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Companies Act 2063

Chapter 4  Shares And Debentures

Section 36 : Agreement to be concluded between debenture trustee and company
1) An agreement has to be concluded between a company issuing debentures and a debenture trustee acting as a trustee for the protection of the interest of debenture-holders, in respect of the debentures to be raised by such company.
2) An agreement to be concluded pursuant to Sub-section(1) shall set out the following matters:
a) That the debenture trustee is entitled to carry out, or cause to be carried out, valuation of the company’s assets, project analysis or management analysis,
b) The period of repayment of the principal and interest of debentures subscribed by the debenture-holder, interest rate, mode of repayment of the principal and interest, mode of repayment of the principal and interest, and matter of conversion of debentures into shares, if there is such provision,
c) Matters, relating to a provision made on the lights of other creditors over the assets of the company and liabilities that may arise therefrom in the future.
d) A provision that, in the case of violation or nonfulfillment of the terms mentioned in the agreement or for any other reasonable reason, if it is required to take the control of financial transactions of the company or to take possession if the security as referred to in the agreement, the debenture trustee may take in his/her possession the assets or properties of such company to the property that he has taken as the security of guarantee or hold the security of guarantee with himself/herself or sell the same by auction or in any other appropriate manner,
e) Procedures for payment by the company of the service charges and other direct expenses of he debenture trustee,
f) That the debenture trustee shall not be liable to any loss or damage caused to the company or the debenture-holder from any act done by the trustee in
that capacity,
g) That, in the event of occurrence of any circumstances necessitating the liquidation of the company, the debenture trustee is entitled to take such legal action as may be taken in behalf of the debenture- holder and exercise the powers of the debenture holder.
h) Other necessary matters on the protection of interest of the debenture-holder.
3) The debenture trustee may, for the protection of interest of the debenture-holder, take security of the assets of the company and get such security registered in his name pursuant to the prevailing law.
4) Prior to the taking of security pursuant to Sub-section(3), the debenture trustee may, if he/she deems necessary, also carry out, or cause to be carried out, the calculation of property or assets to taken as security and the project analysis of management analysis of the company.
5) After the conclusion of an agreement between a debenture trustee and a company pursuant to this Section, such company has to obtain the approval of the debenture, trustee if any.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 37 : Inquiry and demand of statements by debenture trustee
Prior to concluding an agreement with a company to act as a debenture trustee, the debenture trustee may hold necessary inquiry into, and obtain or demand statements, notice or information on, the following matters; and the concerned company has to provide the same if so demanded:
a) Whether the memorandum of association or article of association of the company has a provision that it may raise loans or debentures: and if so, whether the board of directors of the company has powers to make decision to so raise debentures,
b) Whether the memorandum of association or articles of association of the company has a provision that debentures may be raised through a debentures trustee,
c) Whether there is a situation that the existing assets of the company can cover the value of debentures raised,
d) Matters relating to other creditors and liabilities of the company.
e) The company’s balance sheet and auditor’s report.
f) Such other necessary matters as the debenture trustee may consider to be appropriate.

Companies Act 2063

Chapter 4  Shares And Debentures

Section 38 : Company to submit periodic statements to debenture trustee
1) After an agreement has been concluded between a company and a debenture trustee under Section 36, the company has to submit its statements in financial transactions to the debenture trustee in every six months.
2) In the event of a change in the management or any kind of change in the ownership of the company after raising of debentures, the company has to give information thereof to the debenture trustee within seven days after such change.
3) In the event of necessity of any additional statement, notice or information submitted by the company pursuant to Sub-section(1) or (2), the debenture trustee may demand such statement, notice or information from the company; and it shall be the duty of the company to provide the statement, notice or information so demanded to the debenture trustee.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 39 : Rights and liabilities of debenture trustee
1) If the company violates any of the terms mentioned in the agreement concluded under Section 36, the debenture trustee may instruct such company to fulfil such terms as soon as possible or to make repayment of the principals and interest of the debenture-holder within a time limit as specified by him.
2) If it is required to take the financial transaction of the company under control or to possess the security as referred to in the agreement by reason of the repayment made under Sub-section (1) or for any other reason, the debenture trustee may, subject to the prevailing law, take the assets, properties or securities of such company under his/her control and hold the assets or properties so possessed in his own or sell such assets or properties by auction or otherwise or deal with the same in other manner.
3) Following the possession of the assets of the company under sub-section (2), the amount of a debenture-holder shall be repaid out of the proceeds of the sale of the assets. If any amount remains surplus after repayment of the amount payable to the debenture-holder, the debenture trustee shall return that amount to the concerned company.
4) Notwithstanding anything contained elsewhere in this Act, except in cases where the debenture trustee himself buys the assets taken by the debenture trustee as the security, if the proceeds of sale of the property which the debenture trustee has taken as security or possessed be not sufficient to repay all the amounts to debenture holders, the debenture trustee shall pay the amounts to debenture holders on pro rata, and such shortfall amounts shall not be recovered from the debenture trustee’s property.
5) Any debenture-holder holding more than fifty percent debentures may, showing the ground of failure of a debenture trustee to act in the interest of debenture-holder, make an application to the Securities Board to remove such debenture trustee.
6) If, on examining the application made pursuant to sub-section (5), the contents appear to be reasonable, the Securities Board may remove such debenture trustee and arrange for another debenture trustee.

Companies Act 2063

Chapter 4  Shares And Debentures

Section 40 : Service charges to be collected by debenture trustee
1) The debenture trustee may collect service charge from a company for having acted in the capacity of debenture trustee. The amount of such service charge shall be as specified in the agreement concluded between the debenture trustee and the concerned company.
2) The debenture trustee may recover from the concerned company such actual expenses incurred in doing any act on behalf of the company or debenture-holder or in carrying out valuation, possession or auction sale of the company’s assets.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 41 : Debenture trustee to have rights of debenture-holder
1) If a company raising debentures is liquidated or becomes insolvent for any other reasons, the debenture trustee shall make representation on behalf of the debenture-holder.
2) In the event of necessity to institute a lawsuit on behalf of the debenture-holder for the repayment of the principal and interest of such debenture-holder or otherwise, the debenture trustee shall have the right to institute the lawsuit on behalf of the debenture-holder.

Companies Act 2063

Chapter 4  Shares And Debentures

Section 42 : Sale or pledge of shares or debentures
1) The share or debenture of a company may be sold or pledged as good as movable property, subject to this Act, the memorandum of association and articles of association.
2) Notwithstanding anything contained in Sub-section (1) , the promoter of a company, other than a private company which has not borrowed loan from any other company, shall not be entitled to sell or pledge any share held by him/her until the first general meeting of that company is held and a call on the share issued in his/her name is fully paid up .
3) Where a share or debenture is pledged pursuant to Subsection( 1), the pledge shall make an application, in such format and along with such fees as may be prescribed, to the registered office of the company to have the matter recorded in the register. The applicant shall also submit the deed on pledge as well as the share or debenture certificate, along with the application to be so made.
4) Where an application is made pursuant to Sub-section (3), the company shall record in the register the execution of such pledge and on receipt of information on the redemption of the share or debenture so pledged, the records of such pledge shall be crossed off the register.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 43 : Transmission of shares or debentures
1) If any share or debenture is sold, subject to Sub-sections(1) and (2) of Section 42, the buyer thereof shall make an application to the registered office of the company , in such format and along with such fees as may be prescribed, to have such debenture or share transmitted to his/her name. The applicant shall also submit, along with such application, a copy of the deed relating to the sale and purchase of share or debenture certificate.
2) If an application is made under Sub-section (1), the company shall cross off the name of transferor shareholder or debenture holder and enter the name of the transferee shareholder in the register within fifteen days after the making of such application.
3) Notwithstanding anything contained in Sub-section (1), if the prevailing law on securities transactions provides that no deed of transfer is required to transfer the title to the share or debenture of a company such deed shall not be required to be produced along with an application to be so made.
4) If a person who transfers any securities makes an application, also accompanied by a deed of transfer of share, singed by the purchaser to get the transfer of any share or debenture recorded, the company shall register the name of share or debenture transferee in the shareholder register or debenture- holder register as if such application was made by the transferee him/herself.
5) If any person acquires the title to any share or debenture by operation of any other provision contained in the prevailing law the provision contained in Sub-section(1), shall not be deemed to prevent the company from registering such person as a shareholder or debenture-holder.

Companies Act 2063

Chapter 4  Shares And Debentures

Section 44 : Refusal to register share or debenture
1) Notwithstanding anything contained in Section 42 or 43, a company may, in the following circumstances, refuse to record any pledge of a share in the register or to effect transmission of a share or debenture where it has been disposed of:
a) If a call on the share has not been paid up,
b) If such transmission will be contrary to the articles of association of the company or the agreement concluded between the shareholders,
c) If the transfer fee is not furnished along with the application.
2) In refusing to record the pledge of a share or debenture in the register or to effect transmission of a share of debenture under Subsection( 1), the company shall give information thereof to both the transferor and the transferee or the ledger and pledge of the share or debenture within fifteen days from the date of making application.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 45 : Other circumstances where shares or debentures may be transmitted
If any person becomes entitled to the share or debenture holed by any shareholder or debenture-holder because of his death, being insolvent or otherwise under the prevailing law, and that person so acquiring the title or on whom the title is so devolved makes an application accompanied by evidence thereof, to the company, in such format and accompanied by such fees as prescribed, the company shall transmit such share or debenture to him/her.
Provided that notwithstanding that a share has not yet been transferred to the successor so, acquiring the title if an instrument of transfer of the share held by the previous shareholder and of his/her other rights over such share has executed by /her his heir established under the prevailing law, such transfer shall be deemed to have transferred to such successor.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 47 : Information on title to share
1) If a company asks any shareholder to provide information as to what capacity one has obtained the shares with full voting rights registered in his/her name or whether any other person has investment in the shares registered in the name of such shareholder and where there is another person as a the beneficiary of such shares, as to the identity and nature of the title of that person, it shall be the duty of such shareholder to provide such information to the company within thirty days.
2) On receipt of the information sought under Sub-section (1) , the company shall record opposite the name of the concerned shareholder, in the register the date of demand of such information, date of receipt of information and the contents of information received and provide the Office with information pertaining there to within seven days.

Companies Act 2063

Chapter 4  Shares And Debentures

Section 48 : Address of shareholder
1) Unless otherwise altered by a notice, the address of a shareholder mentioned in the shareholder register shall be considered to be his/her real address.
2) In the event of change of address of a shareholder, a written notice of the new address has to be given to the registered office of the company immediately after such change.
3) On receipt of the notice as referred to in Sub-section (2) , the director or company secretary shall record the address so changed in the shareholder register.
4) When a notice is sent to the address supplied by a shareholder, a notice required to be sent by a company to the shareholder under this Act shall, unless otherwise proved, be deemed to have been duly sent, and received by the concerned shareholder.

Companies Act 2063

Chapter 4  Shares And Debentures

Section 49 : Index of shareholders
1) Unless the shareholder register is in such form as in itself to clearly constitute an index of the names of shareholders, every company having more than fifty shareholders shall prepare and keep a separate index of the names of its shareholders.
2) In the event of any alteration in the shareholders register, necessary alteration shall also be made in the index prepared under Sub-section (1) within thirty days after the date of such alteration in the register.
3) The index of shareholders shall be kept in such a manner that necessary information in respect of each shareholder can be readily found from the shareholder register.
4) The index of shareholders shall be kept together with the shareholder register.
5) If a company fails to comply with this Section, the company shall be deemed to have failed to comply with this Act.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 50 : Substantial shareholders
1) If any person subscribes ordinary shares with full voting rights that are five percent or more of the paid up capital of any public company of which shares that person has held in his/her name or through his/her agent, that person shall be deemed to have his substantial shareholding in such company.Provided, however, that in the case of a company having the paid up capital of more than two hundred fifty million rupees, any person shall be deemed to have the substantial shareholding despite that such person has subscribed one percent or more of the total paid-up capital of such company.
2) A substantial shareholder of every public company shall give the company information setting out his/her name, address as well as full particulars of the shares registered in his/her or his agent’s name, within thirty five days after the knowledge of being a substantial shareholder of that company.
3) If a person ceases to be a substantial shareholder of any public company, that person shall give the company information setting out his/her name, the date on which he ceases to possess the status of a substantial shareholder of that company and other particulars as well as the reason why he/she has ceased to be a substantial shareholder, within thirty-five days after the date of knowledge of that matter.
4) Every public company shall maintain a separate register for the purposes of Sub- section (1), (2) and (3).
Companies Act 2063

Chapter 4  Shares And Debentures

Section 51 : Inventory of shares, debentures and loans
1) Every company shall prepare and maintain an inventory of the existing shareholders and debenture -holders and persons who ceased to be shareholders or debenture-holders as at thirty days prior to the holding of the……..µ annual general meeting.
2) The inventory as referred to in Sub-section (1) spell outs, inter alia, the following particulars:
(a) Authorised capital and number of shares of the company,
(b) Issued share capital of the company,
(c) Paid-up capital of the company,
(d) Calls made on every share,
(e) Total amount of instalments paid,
(f) Total amount due and recoverable,
(g) Total amount paid on share and debentures as brokerage,
(h) In the event of forfeiture of any shares, total number of such shares, reasons for forfeiture and date thereof,
(i) Loans borrowed from any bank, financial institution or any other person or guarantee furnished by the company,
(i1)Name and registration number of the company and the amount invested in the shares or debentures of such company, if it is invested in shares or debentures of other companies;
(j) Names and addresses of the existing directors.
(3) Within thirty days of the date of the annual general meeting of the company pursuant to sub-section (1), and if the company does not hold an annual general meeting, if the transaction requires the approval of the relevant body in accordance with the prevailing law, then within one year of receiving such approval and not seeking approval, at least one of the directors shall send it to the office correctly.
(4) A company which does not hold a general meeting shall be sent to the office within six months from the date of the end of the financial year in accordance with sub-section (1).
5) Notwithstanding anything contained elsewhere in this Section, if any company mentions the details as referred to in Sub-section(1), as well, in the report required to be submitted pursuant to Section 78, such company shall not be required to send a separate inventory to this Office under this Section.

Companies Act 2063

Chapter 4  Shares And Debentures

Section 52 : Lien on shares
A company may attach a share registered in the name of a shareholder and dividends payable thereon, as well, for all moneys due and payable by him/her to the company in respect of that share or for all moneys due and payable by him/her to the company under the prevailing law and recover such moneys by deducting the same from the dividends.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 54 : Payment of amount of shares held jointly
1) Every partner shall pay the amount of call on the shares held jointly in proportion to his /her ownership.
2) Except where there exists a duly executed deed indicating specific portion owned by each partner in the shares held pursuant to Sub-section (1), all the holders of such shares shall be deemed to have equal ownership there on.

Companies Act 2063

Chapter 4  Shares And Debentures

Section 55 : Ownership of shares and debentures
If a dispute arises about the ownership of any share or debenture issued by any company, the person whose name is registered in the share or debenture register maintained by the company shall, unless otherwise proved be regarded as the owner of such share or debenture.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 57 : Reduction of share capital
1) If a company intends to reduce its share capital , it may, by adopting a special resolution to that effect at its general meeting, reduce its share capital by obtaining approval of the Court and making necessary amendment to or alteration in the memorandum of association and articles of association, accordingly.
2) On receipt of approval of the Court pursuant to Sub-section (1), the company may reduce its share capital as follows:
(a) By reducing the capital to such amount as has been paid up where calls for payment of amount on shares are not fully paid up,
(b) By paying back any paid-up share capital,
(c) By devaluating the face value of shares where the company has sustained a big loss or suffered a natural calamity.
3) Notwithstanding anything contained in subsection (2), a company which has already become insolvent in accordance with the prevailing law shall not reduce its capital pursuant to this Section.
Companies Act 2063

Chapter 4  Shares And Debentures

Section 59 : Liability of shareholders in respect of reduced share capital
1) Except as otherwise provided for in this Section, a shareholder of the company, past or present, shall not be liable, in respect of any share mentioned in the order issue by the Court confirming the reduction of share capital, to pay any amount exceeding the difference between the amount actually paid on the share or the reduced amount, id any, which is deemed to have been paid thereon, as the case may be , and the fixed amount of such share.
Provided, however, that where the list of creditors entitled to object to the reduction of share capital submitted to the Court omits any such creditor and, after an order confirming the reduction of capital of the company has been made, the company is unable to pay the amount of debt of such creditor, the shareholder of the company shall be bound to pay the amount as mentioned in Sub-section (3) or (4).
2) Notwithstanding anything contained in the proviso to Subsection (1), where the list submitted to the Court omits the name or any claim of a creditor because of a fault or negligence of his own, the shareholders shall not be bound to pay such amount.
3) A person who was a shareholder of a company at the date of issue by the Court of an order confirming the resolution for reducing the capital of the company shall be liable to pay an amount not exceeding the amount which he would have been liable to pay if the company had undergone insolvency and commenced insolvency proceedings on the day immediately before the said date.
4) If a company is insolvent, and where an application is made by a creditor whose name is said to be omitted from the list of creditors submitted to the Court , along with the proof of omission of his name, the Court may, if it thinks fit, settle a list of shareholders who are liable to pay to the company the amount required for the repayment of loan of such creditor and issue an order to make calls on shares held by the shareholders settled on such list as if they were ordinary contributors in an insolvency process of the company.
5) Notwithstanding anything contained elsewhere in this Section, no share holder shall be liable to pay an amount in excess of the face value of a share at the time of the subscription of such share by him.