Skip to content

CA Intermediate · Corporate and Other Laws · Share Capital and Debentures

Ananya Foods Ltd's articles provide for a lien on partly paid shares. Mr Dev holds 500 partly paid shares and owes the company Rs 20,000 on an unrelated loan. The company's board seeks to enforce the lien. Which is the correct position?

A public company may have a lien on its partly paid shares only for calls or amounts payable at a fixed time in respect of those shares. It cannot extend that lien to an unrelated loan owed by the member, so the board cannot enforce the lien for the Rs 20,000 loan.

  1. AThe company has a lien on a share for unpaid calls and amounts payable in respect of that share only; it cannot extend the lien to a loan unrelated to the share in the case of a public companyCorrect
  2. BThe company has a lien on all shares of the member for any debts due to the company, whether related to the shares or not, in a public company
  3. CA public company cannot have any lien on its shares
  4. DThe lien can be enforced by retaining dividends only, never by sale of shares

Explanation

Under the Act, a public company's articles may provide a lien on partly paid shares only in respect of money called or payable at a fixed time in respect of those shares. A lien for an unrelated loan is not permitted. Option B is wrong because it extends the lien beyond the permitted scope. Option C is wrong because partly paid shares may carry a lien.

Did you get it right without looking?

One question tells you little. A timed set on Share Capital and Debentures shows your real accuracy, how long you take and where you lose marks.

Practise Share Capital and DebenturesFree diagnostic mock

More Share Capital and Debentures questions