Section 12 of BRA : Section 12: Regulation Of Paid-Up Capital, Subscribed Capital And Authorised Capital And Voting Rights Of Shareholders

Explanation using Example

Imagine a scenario where 'XYZ Bank Limited' is a banking company operating in India. According to Section 12 of the Banking Regulation Act, 1949, XYZ Bank must ensure the following:

• The bank's subscribed capital must be at least half of its authorised capital. Additionally, the paid-up capital must be at least half of the subscribed capital. If XYZ Bank decides to increase its capital, it must comply with these ratios within a maximum of two years, as permitted by the Reserve Bank of India (RBI).
• XYZ Bank's capital must be composed of either only equity shares or a combination of equity and preference shares. If the bank issues preference shares, it must follow the RBI's guidelines regarding the class, extent, and terms of such shares. Moreover, preference shareholders cannot exercise voting rights in certain matters.
• For any shares owned, a shareholder of XYZ Bank cannot exercise voting rights in excess of 10% of the total voting rights. However, the RBI has the authority to gradually increase this limit to up to 26%.
• No legal claims can be made against a person solely based on being the registered holder of shares in XYZ Bank if the actual title belongs to someone else, except in specific situations like share transfers in accordance with the law or cases involving minors or lunatics.
• The chairman or CEO of XYZ Bank must report to the RBI details about their shareholdings in the bank, including any changes to these holdings or the rights attached to them.

If XYZ Bank fails to comply with these conditions, it would be in violation of the Banking Regulation Act and subject to regulatory actions by the RBI.