I) Introduction:

1. In order to understand the topic of partly paid shares, we need to understand the base of its formation or rather from where it is derived.

2. As per section 2(20) of the Companies Act, 2013, A Company is defined as “an incorporated association which is an artificial person, having a separate legal entity, with perpetual succession, a common seal, a common capital compromised of transferable shares and limited liability.” Shares are mainly derived from the share capital of a company. Share capital is that capital which comes through the issued, subscribed and paid-up shares.

3. There are various types of share capital in a company, for example, Authorized, Issued, Unissued, etc. Of these, issued capital contains a lot of partly paid shares. There are three types of shares which form a part of the Issued Capital.

– Equity Shares

– Equity Shares with differential voting rights

– Preference Shares

4. They have a value which they hold (Face/Nominal Value) and on payment of that value by a person, the individual becomes a shareholder in the company. Coming to the concept of partly paid shares, it can be explained better with the underlying example:

Ex: A company issues 10000 Equity shares at INR 10 each wherein, INR 5 is called as the application money, INR 2.5 is to be the 1st call and the balance INR 2.5 as the 2nd call. In the above example when the shareholder pays INR 5 as the application money and remaining on a call. At this very situation, the shares are partly paid-up. The balance amount when paid will convert partly paid-up shares to fully paid shares.

6. As we understood the basis of its formation. There are other aspects too which are co-related to such security. Such aspects being their types, methods through which they can be allotted and the regulations/compliances which are to be followed in order to issue/allot partly paid securities.

 II) Type of Partly Paid Securities

As seen earlier, Shares were the only kind which we discussed for part payment, But there are other securities too which can be partly paid. The below table states the types of such securities which can be partly paid with their differences.

Particulars Partly paid shares Share Warrants Debentures[i].


Converted to fully paid shares on payment of call money Converted to shares at a definite time on payment of definite installments The debt of the Company can be converted to shares
Voting Rights


Carries voting rights No voting rights No Voting Rights
Marketable Cannot be traded in the market Traded in the market Traded in the Market
Returns Fluctuating rate of return Fixed-rate of return Fixed-rate of return

 With the types of securities which can be allotted through Part-payment; it is necessary that we need to understand various methods/modes too for such an allotment.

III) Methods/Modes of Allotment

The table below states such modes/methods of allotment as well as point out the regulation and laws which are to be taken into consideration while issuing partly paid securities.

Public Issue Private Placement Preferential Issue
SEBI (ICDR) Regulations, 2009

FEMA (Non-Debt Instruments) Rules 2019

Section 42 of Companies Act, 2013 and Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014

FEMA (Non-Debt Instruments) Rules 2019

Section 62(1)(c) and Rule 13 of Companies (Share Capital and Debentures) Rules, 2014

FEMA (Non-Debt Instruments) Rules 2019

IV) Compliances for Allotment

1. If a company decides to come out with such an allotment of securities, there are compliances which are to be adhered to. In case of any default on the part of the company, it will attract a penalty as well as cancellation of the issue.

2. In regard to such an issue, it is mandatory for a company to follow the recent guidelines prescribed by [ii]SEBI through their recent discussion paper. The gist of the paper is mentioned below, and the table gives information about investments are done by Foreign Individuals or Entities in companies situated in India (domestic) i.e. Public (listed/Unlisted) or Private Companies.

Mode of Issuance Partly paid Shares (Equity & Preference) Share Warrant Debentures
Minimum upfront payment Period within which to be made fully paid up (Months) Minimum upfront payment Period within which to be made fully paid up


Minimum upfront payment Period within which to be made fully paid up


Public 25% 12 Not Specified 12 There are no specific guidelines issued by SEBI in case of issue of partly paid Debentures.
Rights Not Specified 12 Not Specified 12
Preferential Not Applicable 25% 18

There is a Cap on the above stated table on the basis of their issue size.


V) Myths around Issue of Partly Paid Securities.

As we went through the whole process of allotment as well as compliances there are certain myths too which are attached to partly paid shares.



Questions Answers
1. Are Partly paid shares freely transferrable in the market? Yes, Even partly paid shares are transferrable as per Section 56 of the CA, 2013 & Rule 11 of Companies (Share Capital and Debentures) Rules, 2014 [iii] and they can be listed too.
2 Can Partly paid-up shares get converted to fully paid without calling for uncalled amount on shares? Yes, the company can convert partly paid shares into fully paid shares (without calling for the uncalled amount on shares) through capitalization of profits.

As stated under Table F Schedule I of the CA, 2013. [iv]

3 Can shareholders of partly paid shares receive Bonus shares? As per Section 63(2) (e) of Companies Act, 2013 it cannot issue bonus shares although, company can issue bonus shares in the form of converting partly paid to fully paid.

VI) Conclusion

1. In regard to the types, allotment, compliances and various myths that are related to partly paid-up shares; they have their own set of pros and cons. While they enjoy the same rights as those of fully paid ones i.e. Voting, Dividend (appropriately) and during winding up they can demand their equal share but, they have their own Cons too.

2. Issue of bonus shares is restricted because of such securities as well there are restriction as we mentioned above on investments made by foreign entities need to be fully paid within 12 months of the allotment.

3. Looking on the brighter side, the company can develop its future plans in a much organized manner. Since it is on the discretion of the Directors/Investors for calling monies on the unpaid/balance number of shares for Indian Investors. The company can plan their capital structure accordingly. Future projects and plans can be managed in a systematic manner, as these securities pay as per their maturity/boards discretion and any arrears can lead to forfeiture (Untaxed Profits) or reissue.

[i] https://www.bajajfinserv.in/allotment-of-ncds-on-private-placement-basis-as-on-06-11-2018.pdf


[ii] https://www.sebi.gov.in/sebi_data/attachdocs/1417511914375.pdf

[iii] http://ebook.mca.gov.in/default.aspx

[iv] http://ebook.mca.gov.in/Default.aspx?page=main

[v] Definition u/s 63 of the Companies Act, 2013

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Company: Constellation blu LLP
Location: Mumbai, Maharashtra, IN
Member Since: 15 Feb 2020 | Total Posts: 1

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  1. Bishamber Kumar Gakher says:

    I bought few shares I. e. TATASTLPP and SATINPP-E1 but both are not appearing in my holding. Pl clarify. How can I deal further with these shares

    1. Yash Ghelani says:

      There was a prohibition on the issue of partly paid-up securities on a preferential issues basis as, under Rule 13(2) (c) of the Principal Rules, the securities allotted by way of the preferential offer shall be made fully paid up at the time of their allotment.

  2. sanjeet kumar says:

    what is difference between tata steel pp share and tata steel share. we have purchased tata steel pp at market price 210 रूपीस,but not shown in my holdings.

  3. meenakshi says:

    With respect to voting rights of a (equity, preference) shareholder being partly paid-up shares, will he be entitled to vote on the resolutions even if the shares are partly paid or will there be any restrictions.

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June 2021