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What is Call on Shares?


Posted Date: 21-Mar-2010  Last Updated:   Category: Education    
Author: Member Level: Gold    Points: 10


Procedure regarding calls on shares; Calls on share



Definition: A call may be defined as "A demand made by the company on its share holders to pay whole or part of the balance remaining unpaid on each share at any time during the life time of a company".

For example : The price of a share is Rs.100/-. At the time of applying for shares, the investor has to pay Rs.5/- of the nominal value of share i.e. Rs.5, so Rs.95/- is balance on each share. As and when the company needs money its asks its share holders to pay, suppose the company asks its shareholders to pay
per share, that is known as calls on shares.

Procedure regarding calls on shares:

(1) Board Meeting for passing a call resolution: A meeting of the Board of Directors will be called. In this meeting a resolution will be passed regarding making a call. The resolution must specify the amount of
call money, the date and place of its payment.

(2) Closing of the Register of member and the Share Transfer Book: In the same Board meeting a resolution is passed, whereby the secretary is given permission to close the transfer book and the register of members for a period of about 15 days.

(3) Preparing the call lists: After closing the transfer book, the work of preparing the call lists from the register of member, is under taken by the secretary. A call lists shows details like name and address of the share holders, numbers of shares held by them, the amount due on the call etc. This helps the secretary in sending call letters to the members.

(4) Drafting call letters: The secretary prepares a draft of the all letter in consultation with the chairman of the company. He gets the call letters printed in the required quantity. A call letter is divided into three parts. They are: (i) A call letter proper, (ii) A call receipt, (iii) A call slip.

(5) Issuing call letters / Dispatch of call notice: After the preparation of call lists, the secretary issues a call letter to the share holders on their registered address. He also publishes a call notice in a leading newspaper for the information of shareholders.

(6) Arrangement with bankers for call money: The has to make necessary arrangement with the bankers of the company to receive call money from the members. Accordingly instructions are given to the bankers. The amount receive on calls is credited to a separate account called a "Call Account". After receiving the call money, bankers arrange to send the amount to the company. The call letter and call receipt are returned to the shareholder with necessary entries, signature and stamp.

(7) Entries in the call list and the register of members: After receiving the call money, bankers return call letter and call receipt to the members and send all call slips to the company's office. The secretary then makes entries against the respective names in the call lists and the register of members.

(8) Preparing list of Defaulters: The secretary prepares a list of those members who have not paid the call money on the stipulated date. Such a list is called a list of defaulters. It is placed before the Board for necessary action. Unpaid call money by members is called as "Calls in Arrears".


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Responses to "What is Call on Shares?"
Guest Author: Basil Dabare     13 Apr 2014
Thank you very much. I found it a very useful guide.


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