'To ensure that the directors have some stake in the proposed company, the Articles usually have a provision requiring them to buy a certain number of shares.' These shares are called.............
Answer & explanation
Correct answer: option 4
The correct answer is option 4- Qualification Shares.
To ensure that the directors have some stake in the proposed company, the Articles usually have a provision requiring them to buy a certain number of shares. They have to pay for these shares before the company obtains a Certificate of Commencement of Business. These are called Qualification Shares.
OTHER OPTIONS-
- Equity shares- Equity shares, also known as ordinary shares or common shares, represent ownership in a company. Holders of equity shares are considered the residual owners of the company, meaning they have a claim on the company's assets and earnings after all liabilities and obligations have been satisfied.
- Preference shares- Preference shares come with certain preferences over equity shares. Holders of preference shares are entitled to receive fixed dividends at a predetermined rate before any dividends can be distributed to equity shareholders.
- Sweat equity shares- Sweat equity shares are issued by a company to its employees or directors as a form of compensation for their contributions to the company's growth and success.