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Kerala PSC Indian Economy Book Study Materials Page 391Book's First Page
e rit ar et in ndia 14.11 was to be on the Board of Directors or an office- Speculators may start hoarding them for hefty bearer in a stock exchange. margins, this was seen in India in mid-2006. And This has been done in the case of all stock since such stocks get hoarded, ultimately their exchanges except three regional stock exchanges market prices increase. The speculators earn profit (RSEs) in India. after offloading (selling) these shares at high prices and others who purchase these shares ultimately AuthoriseD cAPitAl might fetch huge losses because price rise of The limits upto which shares can be issued by a these stocks are unintentional or each intentional company—also known as the nominal or registered manipulation and nothing else. capital. This is fixed in the Memorandum of Association (MoA) and the article of association esoP (AoA) of a company as required by the Companies The Employee Stock Ownership plan (ESOP) Act (Law). enables a foreign company to offer its shares to employees overseas. It was allowed in India PAiD-uP cAPitAl (February 2005) provided that the MNC has The part of the authorised capital of a company minimum 51 per cent holding in its Indian that has actually been paid by shareholders. A company. Earlier a permission from the RBI was difference may arise because all shares authorised required for such an option. might not be issued or issued shares are only partly paid-up. sbt Screen Based Trading (SBT) is trading of stock subscribeD cAPitAl based on the electronic medium, i.e., with the The amount actually paid by the shareholders or help of computer monitor, internet, etc. First have been committed by them for contribution. such trading was introduced in New York in 1972 by the bond broker Cantor Fitzgerald. India issueD cAPitAl introduced it in 1989 at the OTCEI. Now it is The amount which is sought by a company to be carried out at all exchanges. raised by issuing shares which cannot exceed the authorised capital of the company. ofcDs Debentures are the debt instruments which may greenshoe oPtion be issued by a listed or non-listed firm to raise A provision under which a company issuing shares funds in a security market. They are of many for the first time is allowed to sell some additional types, viz., Redeemable, Non-redeemable, Partially shares to the public—usually 15 per cent, is Convertible and Fully Convertible. In case of ‘fully also known as over-allotment provision. It gets convertible debentures’ an ‘option’ (that is why the its name from the first company (Greenshoe name OFCDs, i.e., Optionally Fully Covertible Company, USA) which was allowed such an Debentures) is given to the debenture-holders option. who may wish to convert their OFCDs into shares (after expiry of the period fixed by the debenture Penny stocks issuing firm—known as ‘lock-in’ period). But The share which remains low-priced at a stock the ‘rate’, will be decided by the company (e.g., exchange for a comparatively longer period. how many shares against how many debentures).