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).