Shares, companies & investment

SHARES, COMPANIES & NEPSEBrief Information on the Shares, Companies and

NEPSE

Prepared & Presented By:

Bhesh Raj DevkotaAuthor at Adhuro

Types of Companies

Companies can be of two types:

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1. PRIVATE COMPANIES

2. PUBLIC COMPANIES

PUBLIC COMPANIES require higher paid up capital.

Number of shareholders are high and the transaction of the shares is done through stock exchange.

Legal provisions require some of the transactions (Banking, Insurance etc) to be carried on by public company only.

The Nepal Companies Act (2063), Nepal Accounting Standards (NAS) and other regulatory literatures require public companies for greater degree of disclosure requirements and provisions.

Example of ‘Reliance Company, India’

Reliance Company in India has approximately 3 million shareholders.

Differences Between Public and Private CompanyBasis Private Company Public Company

1. Minimum Share Capital

(न्युनतम चुक्ता पंुजी)

As per AOA Rs 10,000,000*

2. Minimum Shareholders

1 7**

3. Face Value of Shares(अंकि�त मूल्य)

As per AOA Rs50 or higher divisible by 10

4. No of Directors(संचाल��ो संख्या)

As per AOA 3-11

5. Maximum no of Shareholder.

50 No Limit

6. Listed ? Not Listed Can be Listed (Must be listed for Public transaction of Shares)

How to know if a Company is Private or Public?

GUESS !!!

HERE YOU ARE!If the name of the company ends with ‘Pvt. Ltd.’, the company is Private

Company.

Examples:1. Ncell Pvt. Ltd.2. Parewalabs Pvt. Ltd.3. Rigo Technologies Pvt. Ltd.

Name of a Public Company Ends with ‘Ltd.’

Examples:1. Nepal Telecom Ltd.2. Nepal Bank Ltd.3. Mega Bank Ltd.4. Unilever Nepal Ltd.

Signs of Public CompaniesIf it ends with ‘Limited’ it is Public Company. *

Any activities that relates with open trading of shares, stock exchange and so on about a company are the evidences that the company is a Public Company.

What is Capital?

The amount of resources (mostly money, sometimes other assets) invested by the owner of an institution for the motive of profit is known as capital.

Properties of Capital ?

Properties of Capital• Ownership on the company.• No refund in normal course of business.• Consideration is not charged against profit, rather appropriation of profit.• Underlying ownership on the assets of the company and underlying

liabilities over the liabilities of the company.

Types of Capital

Authorized Capital This is the capital as stated in AOA, MOA and other documents. This is

the highest value of capital that the company can issue.

Issued Capital The part of authorized Capital which is issued to be subscribed is

issued capital.

Subscribed Capital The Value of issued capital undertaken by the issued group to purchase

is known as subscribed capital.

Called up Capital The portion of subscribed capital that the company has called to pay is

called up capital.

Paid Up Capital The portion of called up capital which is paid by the subscribers is

known as the paid up capital. This is the capital that is shown in Balance Sheet.

What is Share? Capital is divided into several fractions. Each such fraction is called A

UNIT OF SHARE CAPITAL ( ए� कि�त्ता शेयर ).

In Nepal, face value of each share of Public Companies can be of Rs 50 or any larger amount in multiple of Rs10.The shares of others stocks can be of different face value. (Like NMB Sulabh Investment Fund

Types of Shares Equity Share Capital/Ordinary Share(साधारण शेयर)

The mostly used type of share is equity share capital. These shares have residual claim at the time of winding up and on the profit.

Preference Share Capital (प्राथमिम� शेयर)These shares provide certain rate of return to the shareholders at the time of profit. The payment for these shares at the time of winding up of the company is done before Equity Shares.

9% Pref. Shares, 14% Pref. Shares are some of its examples.

Can a Private Company Sell its Shares?

A private company can not offer its shares in public. A private company can not issue debenture. A private company can not be listed at Stock Exchange.

Public Company & Stock Exchange A public company must sell its shares through Stock Exchange only. The price of shares is determined by the market (Transactions at Stock

Exchange). No two persons are allowed to buy and sell the securities (Shares,

Debentures and Others of Public Company) themselves. They should approach stock broker(s) who then matches the demand with supply and perform the transaction.

What is NEPSE?

NEPSE There is a company in Nepal that handles the registration of the securities,

trading and other related transactions. The company is NEPAL STOCK EXCHANGE (NEPSE). This arranges the market place for securities in Nepal.

The Weighted Average of closing value of all the shares listed with Nepal Stock Exchange (NEPSE) is the NEPSE Index for that particular transaction day.

In practice, we generally mean ‘NEPSE Index’ by the term ‘Nepse’.

CIRCUIT BREAKER

What is Circuit Breaker???

Okay, I Will Tell You!

Stock Exchanges have set such a system which protects the investors from sudden twists in the market to some extent.

The system of halting transaction at Stock Exchange for a specific duration or for the whole day is known as CIRCUIT BREAKER.

When Circuit Breaker is needed…

Example of Bombay Stock Exchange – Need for Circuit Breaker

Price Band Price Band is applicable on individual securities. The trading of the

individual securities are not halted but allowed to trade within the price range.

The price band is 10 percent of previous close on either way. During the ATO (At the opening) session the range is 5 percent on either way of previous close price. After the band is 2 percent on either way of the last traded price till it reaches to 10 percent of the previous close.

EXAMPLE FOR PRICE BAND

The closing market price per shares of Unilever Nepal Ltd was Rs. 26,010 on 20th August, 2015

The fluctuation in price will be limited to 10% for next transaction day in either way. i.e., no transaction can take place below NRs 23,409 (90% of 26,010 )and above NRs. 28611 (110% of 26,010 ) during the first transaction day after that day.

The first transaction during the next transaction day can not be done with price fluctuation above 5% of the previous closing price. (i.e. below NRs. 24,710 (95% of 26,010 ) and above NRs. 28,611 (110% of 26,010 ) )

Each other transaction (other than the first transaction of the day) can not be done below 98% and above 102% of the price transacted for the last time. i.e. below NRs. 25,499 and above NRs. 26,010.