Section 4 of The State Financial Corporations Act, 1951 in hindi
1[(1) The authorised capital of the Financial Corporation shall be such sum as may be fixed by the State Government in this behalf, but it shall not be less than fifty lakhs of rupees or exceed five hundred crores of rupees: Provided that the State Government may, on the recommendation of the Small Industries Bank, by notification in the Official Gazette, increase the authorised capital up to one thousand crores of rupees.
- (2)Subject to the provisions of section 4D, the authorised capital shall be divided into such number of fully paid-up shares of the same face value and such number of fully paid-up redeemable preference shares of the same face value and shall be issued to the parties mentioned in clauses (a), (b) and (c) of sub-section (3) and in the case of parties referred to in clause (d) of that sub-section, such shares shall be issued at such times and in such manner as the State Government may, by notification in the Official Gazette, determine.
- (3)Subject to the approval of the State Government and the Small Industries Bank, the Board shall determine the number of shares which may, respectively, be distributed among--
- (a)the State Government;
- (b)the Small Industries Bank;
- (c)public sector banks, the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956), other insurance companies owned or controlled by the Central Government, other institutions owned or controlled by the Central Government or the State Government, as the case may be; and
- (d)parties other than those referred to in clause (a), or clause (b) or clause (c): Provided that the number of shares which may be allocated to parties referred to in clause (d) shall in no case exceed forty-nine per cent. of the total number of issued equity shares: Provided further that no increase in the issued equity capital shall be made in such a manner that the parties referred to in clause (a) or clause (b) or clause (c) hold in aggregate, at any time less than fifty-one per cent. of the issued equity capital of the Financial Corporation.]
- (4)Subject to the other provisions contained in this section, the allocation of shares among the parties referred to in clauses (c) and (d) of sub-section (3) and the allotment of such shares shall be made by the Financial Corporation in such manner as may be prescribed. 2[(5) If any shares allocated to any of the parties referred to in clauses (c) and (d) of sub-section (3) remain unsubscribed, they shall be subscribed for equally by the State Government and the 3[Small Industries Bank].]
Summary
- The state government fixes the corporation's authorized capital, which must be between fifty lakh rupees and five hundred crore rupees.
- This authorized capital limit can be increased up to one thousand crore rupees on the recommendation of the Small Industries Bank.
- The capital can be divided into equity shares and redeemable preference shares, which must have the same face value within their class.
- Regular private parties are restricted from owning more than forty-nine percent of the total issued equity shares.
- Any shares offered to public sector institutions or private parties that remain unsold must be subscribed to equally by the state government and the Small Industries Bank.
Practical examples
FAQ
1. Can a state government set the initial authorized capital of a corporation to ten lakh rupees?
No. Under Section 4(1), the authorized capital of a corporation cannot be less than fifty lakh rupees.
2. What is the maximum percentage of shares that private individuals can own in the corporation?
Private individuals and other non-government parties cannot hold more than forty-nine percent of the total issued equity shares.
3. Who must buy any shares that remain unsold after a public share offering?
Any unsubscribed shares must be bought in equal halves by the State Government and the Small Industries Bank.
Test yourself
Q1.Under Section 4 of The State Financial Corporations Act, 1951, what is the statutory minimum and maximum limits for the authorized capital fixed by a State Government?
Q2.Under Section 4 of The State Financial Corporations Act, 1951, whose recommendation is required for the State Government to increase the authorized capital up to one thousand crore rupees?
Q3.Under Section 4 of The State Financial Corporations Act, 1951, what is the maximum limit on equity shares that can be allocated to private parties (parties other than the government and public institutions)?
Q4.Under Section 4 of The State Financial Corporations Act, 1951, what must happen if any allocated shares remain unsubscribed by public sector banks or private parties?
Q5.Under Section 4 of The State Financial Corporations Act, 1951, how does the power to establish a Corporation under Section 3 affect the distribution of its share capital?