Every company limited by shares must have a share capital. Share capital refers to the amount invested in the company for it to carry out its operations. The share capital of the company can be altered or increased, subject to certain conditions. A company cannot issue share capital in excess of the limit specified in the capital clause without altering the capital clause of the memorandum of association.

 

A Company limited by Share Capital can alter the Capital Clause of the MOA as follows:

 

• Increase Authorised Share Capital
• Consolidate-divide-large amount per shares
• Convert all paid-up shares into stock, and reconvert
• Sub divide its shares
• Cancel shares which have not been taken up
• Cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.

 

We will briefly discuss the process involved in each of the alteration.

 

Increase in authorize capital (SECTION- 13 & 61):

 

The need for an increase in authorised share capital of the company may arise when the company is planning to enlarge its business operations by fresh issue of capital. If the increase of authorised share capital results in alteration of articles of association special resolution is required, otherwise ordinary resolution is to be passed.

 

Steps of Increase in Authorize Capital (Section- 13 & 61):

 

• Step 1: Notice of Board Meeting

A Notice is required to given 7 days prior Notice is required, if not then shorter consent of majority of directors need to be taken before the meeting.

Documents Required

1. Issue of Notice/Shorter Notice Consent of BM
2. Agenda
3. Notes to agenda
4. Resolution

 

• Step 2: Hold Board Meeting

Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013 and as per SS-1, for convening a meeting of the Board of Directors.

Action to be taken in Board Meeting

1. Approval for Alteration of Capital
2. Decide day, date, time and venue of General Meeting

 

• Step 3: Notice of General Meeting

Notice of EGM shall be given at least 21 days before the actual date of EOGM. If EOGM is decided to be taken shorter notice, then take the shorter consent of at least 95% before the dispatch of Notice.

 

• Step 4: Hold EGM

Action Required:

1. Check the proper quorum
2. Check whether auditor present
3. Pass Ordinary Resolution
4. Get approval for alteration of MOA

 

• Step 5: File Form MGT-14

Form MGT-14 to be filed within 30 days of passing of Ordinary Resolution.

Attachments

1. CTC of resolution passed by the Members for Alteration of MOA along with Explanatory Statement
2. Notice of EGM
3. Copy of Altered MOA

 

• Step 6: File Form SH-7

Form SH-7 to be filed within 30 days of passing of Ordinary Resolution.

Attachments

1. CTC of resolution passed by the Members for Alteration of MOA along with Explanatory Statement
2. Notice of EGM
3. Copy of Altered MOA

 

Steps for consolidation of share capital section 14:

 

A company may alter its existing paid-up share capital by consolidation or division of all or any of its shares into shares of larger denominations than its existing shares. To consolidates means to bring together (separate parts) into a single or unified whole.

 

• Enabling Clause:

The company should ensure that Articles of Association contain a clause, authorizing it to consolidate its shares. If there is no such provision, the articles should be first altered in accordance with the provisions of Section 14 of the Companies Act, 2013.

 

Steps for Consolidation of Share Capital (Section 14):

 

• Step 1: Notice of Board Meeting

A Notice is required to given 7 days prior Notice is required, if not then shorter consent of majority of directors need to be taken before the meeting.

Documents Required

1. Issue of Notice/Shorter Notice Consent of BM
2. Agenda
3. Notes to agenda
4. Resolution

 

• Step 2: Hold Board Meeting

Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013 and as per SS-1, for convening a meeting of the Board of Directors.

Action to be taken in Board Meeting

1. Approval for Consolidation of Share Capital
2. Decide day, date, time and venue of General Meeting

 

• Step 3: Notice of General Meeting

Notice of EGM shall be given at least 21 days before the actual date of EOGM. If EOGM is decided to be taken shorter notice, then take the shorter consent of at least 95% before the dispatch of Notice.

 

• Step 4: Hold EGM

Action Required:

1. Check the proper quorum
2. Check whether auditor present
3. Pass Special Resolution for Consolidation of Share Capital
4. Get approval for alteration of MOA

 

• Step 5: File Form MGT-14

Form MGT-14 to be filed within 30 days of passing of Special Resolution.

Attachments

1. CTC of resolution passed by the Members for Consolidation of Share Capital along with Explanatory Statement
2. Notice of EGM
3. Copy of Altered MOA

 

• Step 6: File Form SH-7

Form SH-7 to be filed within 30 days of passing of Special Resolution.

Attachments

1. CTC of resolution passed by the Members for Consolidation of Share Capital along with Explanatory Statement
2. Notice of EGM
3. Copy of Altered MOA

 

Steps for conversion of shares into stock section 14:

 

A company limited by shares may alter its capital clause of memorandum for converting any of its fully paid-up shares into stock or vice-versa. When a number of shares are converted into a single holding with a nominal value equal to that of the total value of the shares, it is called conversion of shares into stock. Stock is the aggregate of the fully paid-up shares legally consolidated and portions of which aggregate may be transferred or split up into fractions of any amount without regard to the original nominal value of shares.

 

Where a company having a share capital has converted any of its shares into stock, and given notice of the conversion to the Registrar, all the provisions of this Act which are applicable to shares only, shall cease to apply on so much of the share capital as is converted into stock

 

• Enabling Clause:

The company has to make sure that its articles of association contain a provision authorising it to convert its fully paid shares into stock. If there is no such provision, the articles have to be first altered in accordance with the provisions of Section 14 of the Companies Act, 2013.

 

Steps for Conversion of Shares into Stock (Section 14):

 

• Step 1: Notice of Board Meeting

A Notice is required to given 7 days prior Notice is required, if not then shorter consent of majority of directors need to be taken before the meeting.

Documents Required

1. Issue of Notice/Shorter Notice Consent of BM
2. Agenda
3. Notes to agenda
4. Resolution

 

• Step 2: Hold Board Meeting

Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013 and as per SS-1, for convening a meeting of the Board of Directors.

Action to be taken in Board Meeting

1. Approval for Conversion of Shares into Stock
2. Decide day, date, time and venue of General Meeting

 

• Step 3: Notice of General Meeting

Notice of EGM shall be given at least 21 days before the actual date of EOGM. If EOGM is decided to be taken shorter notice, then take the shorter consent of at least 95% before the dispatch of Notice.

 

• Step 4: Hold EGM

Action Required:

Check the proper quorum

Check whether auditor present

Pass Special Resolution for Conversion of Shares into Stock

Get approval for alteration of MOA

 

• Step 5: File Form MGT-14

Form MGT-14 to be filed within 30 days of passing of Special Resolution.

Attachments

1. CTC of resolution passed by the Members for Conversion of Shares into Stock along with Explanatory Statement
2. Notice of EGM
3. Copy of Altered MOA

 

• Step 6: File Form SH-7

Form SH-7 to be filed within 30 days of passing of Special Resolution.

Attachments

1. CTC of resolution passed by the Members for Conversion of Shares into Stock along with Explanatory Statement
2. Notice of EGM
3. Copy of Altered MOA

 

Sub-Division of share capital:

 

A company may sub-divide its share capital if so authorised by articles of association. It is done by an ordinary resolution passed at a general meeting. Sub-division is the method by which the nominal value of each share is reduced to a smaller amount.

 

• Enabling Changes:

The company should ensure that its articles of association contain a provision authorising it to sub-divide its shares. If there is no such provision then the articles have to be altered in accordance with the provisions of Section 14 of the Companies Act, 2013, before proceeding to sub-divide its shares.

 

Steps for Sub-Division of Share Capital:

 

• Step 1: Notice of Board Meeting

A Notice is required to given 7 days prior Notice is required, if not then shorter consent of majority of directors need to be taken before the meeting.

Documents Required

1. Issue of Notice/Shorter Notice Consent of BM
2. Agenda
3. Notes to agenda
4. Resolution

 

• Step 2: Hold Board Meeting

Issue notice in accordance with the provisions of section 173(3) of the Companies Act, 2013 and as per SS-1, for convening a meeting of the Board of Directors.

Action to be taken in Board Meeting

1. Approval for Sub-Division of Capital
2. Decide day, date, time and venue of General Meeting

 

• Step 3: Notice of General Meeting

Notice of EGM shall be given at least 21 days before the actual date of EOGM. If EOGM is decided to be taken shorter notice, then take the shorter consent of at least 95% before the dispatch of Notice.

 

• Step 4: Hold EGM

Action Required:

1. Check the proper quorum
2. Check whether auditor present
3. Pass Special Resolution for Sub-Division of Capital
4. Get approval for alteration of MOA

 

• Step 5: File Form MGT-14

Form MGT-14 to be filed within 30 days of passing of Special Resolution.

Attachments

1. CTC of resolution passed by the Members for Sub-Division of Capital along with Explanatory Statement
2. Notice of EGM
3. Copy of Altered MOA

 

• Step 6: File Form SH-7

Form SH-7 to be filed within 30 days of passing of Special Resolution.

Attachments

1. CTC of resolution passed by the Members for Sub-Division of Capital along with Explanatory Statement
2. Notice of EGM
3. Copy of Altered MOA

 

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