The Heart of Section 50 of Companies Act A Deferred Payment Option

For the convenience of both the investors and the company, the section allows the company to accept a portion of the amount due on shares from a member without actually paying the entire paid amount. This means that the investor can contribute only a portion of the actual value of shares initially in order to acquire them.

The importance of this section can be studied under two main sub-headings: –

Why is this Option Offered?
The company may offer the option of deferred payment for the following reasons:

Facilitating Initial Investment:
It allows investors who are looking to upgrade their investment by providing them a medium to acquire shares without having any financial restrictions.

Incentivizing Early Subscription:
Sometimes, the company offers to shareholders who tend to opt for upfront payment to speed up the capital raising process.

Managing Cash Flow:
Corporations can enhance their short-term cash flow by accepting partial payments, supporting operations and future investment.

Flexibility within boundaries:
Section 50 of the Act provides flexibility to the investors and companies within the boundary specified under it.

Partial Payments:
Companies are not required to take a set percentage of the outstanding amount; they can take any fraction.

Phased Payment Schedule:
The company prescribes a pre-determined plan for the investors to pay their remaining dues to the company as per their needs.

Differentiation between Classes:
The shares are said to be of the same class if they fulfill two criteria:

The shares have the same nominal value, and
The shares have the same paid-up capital.
The different types of classes of shares can have different criteria for paying unpaid share capital.