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Section 7 – The State Financial Corporations (Amendment) Act,2000

The State Financial Corporations (Amendment) Act,2000

Section 7. Substitution of new sections for sections 5 to 10

For sections 5 to 10 of the principal Act, the following sections shall be substituted, namely:-

‘5. Transfer of shares.

(1) Save as otherwise provided in sub-section (2), the shares of the Financial Corporation shall be freely transferable (2) Nothing contained in sub-section (1) shall entitle the parties referred to in clauses (a), (b) and (c) of sub-section (3) of section 4 to transfer any of the shares held by them in the Financial Corporation if such transfer will result in reducing the aggregate value of shares held by them to less than fifty-one per cent. of the issued equity capital of the Financial Corporation (3) The Board may refuse to register the transfer of any shares in the name of the transferee on any one or more of the following grounds, and on no other ground, namely:-

(a) The transfer of the shares is in contravention of the provisions of the Act or regulations made thereunder or any other law;

(b) The transfer of the shares, in the opinion of the Board, is prejudicial to the interests of the Financial Corporation or to the public interest;

(c) The transfer of shares is prohibited by an order of a court, tribunal or any other authority under any law for the time being in force

(4) The Board shall, before the expiry of two months from the date on which the instrument of transfer of shares of the Financial Corporation is lodged with it for the purpose of registration of such registration ought not or ought to be refused on any of the grounds referred to in sub-section (3) but also,- transfer, not only form, in good faith, its opinion as to whether such (a) if it has formed the opinion that such registration ought not to be so refused, effect such registration; and (b) if it has formed the opinion that such registration ought to be refused on any of the grounds mentioned in sub-section (3), intimate the transferor and

(5) An appeal against the order of refusal of the Board under sub-section (4) shall lie to the Central Government and the procedure for filing and hearing of such appeal shall be in accordance with the rules made by the Central Government in this behalf

“6. Conversion of shares guaranteed by State Government.

(1) On the commencement of the State Financial Corporations (Amendment) Act,2000, every shareholder shall be given by the Financial Corporation an option to require the Financial Corporation to convert the shares held by him into shares of the same nominal value without the State Government guarantee and issue fresh share certificate or to pay the amount paid in respect of such shares not exceeding the face value of the shares held by him

(2) The option referred to in sub-section (1) shall be given by the Financial Corporation to every existing shareholder before the expiry of three months from the commencement of the State Financial Corporations (Amendment) Act,2000 and shall be exercised by the shareholder within three months from the date of receipt of such option

(3) The option exercised under sub-section (2) shall be final and shall not be altered or rescinded after it has been exercised

(4) If, a shareholder exercise option for receiving the payment within the stipulated time, the Financial Corporation shall, on surrender of the share certificate held by him, pay him the amount paid in respect of such shares not exceeding the face value thereof: Provided that if any shareholder fails to exercise the option given to him under sub-section (1), within the time stipulated in sub-section (2), he shall be deemed to have exercised the first option

(5) Nothing contained in sub-section (4) shall be deemed to result in reduction of the share capital and the Financial Corporation may, subject
to the provisions of su b-section (3) of section 4, allot the shares surrendered by any shareholder, to any other person

(6) The Financial Corporation shall keep at its head office a register, in one or more books, of shareholders and shall enter therein the following particulars so far as they may be available, namely:-

(i) The names, addresses and occupations, if any, of the shareholders and a statement of the shares held by each shareholder, distinguishing each share by its denoting number;

(ii) The date on which each person is so entered as a shareholder;

(iii) The date on which any person ceases to be a shareholder; and

(iv) Such other particulars as may be prescribed:

Provided that nothing in this sub-section shall apply to the shares held with a depository under the Depositories Act,1996 (22 of 1996)

(7) Notwithstanding anything contained in sub-section (6), it shall be lawful for the Financial Corporation to keep the register of the shareholders in computer floppies or diskettes, compact disk or any other electronic form subject to such safeguards a may be prescribed

(8) Notwithstanding anything contained in the Indian Evidence Act,1872 (1 of 1872), a copy of, or extract from, the register of shareholders, certified to be a true copy under the hand of an officer of the Financial Corporation authorised in this behalf, shall, in ll legal proceedings, be admissible in evidence

(9) The register of beneficial owners maintained by a depository under section 11 of the Depositories Act,1996 (22 of 1996) shall be deemed to be a register of shareholders for the purposes of this Act (10) Notwithstanding anything contained in sub-sections (6), (7) and (8), no notice of any trust, express, implied or constructive, shall be entered on the register of shareholders or be receivable by the Financial Corporation: Provided that nothing in this sub-section shall apply to a depository in respect of shares held by it as a registered owner on behalf of a beneficial owner

Explanation

For the purposes of sub-sections (6), (9) and this sub-section, the expressions “beneficial owner”, “depository” and “registered owner” shall have the meanings respectively assigned to them in clauses (a), (e) and (j) of sub-section (1) of section 2 of the Depositories Act,1996 (22 of 1996)

(11) Notwithstanding anything contained in the Indian Trusts Act,1882 (2 of 1882), the shares of the Financial Corporation shall be deemed to be included among the securities enumerated in section 20 of that Act

“7. Additional capital of Financial Corporation and borrowing powers.

(1) The Financial Corporation may issue and sell bonds and debentures for the purpose of increasing its working capital.

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