Relevant Provisions: Section 61 r/w 64 of Companies Act of 2013, Rule 15 of Companies (Share Capital and Debenture) Rules of 2014
Types of alteration of capital clause in the general meeting of a company limited by shares as per section 61 (1) of the Companies Act, 2013 can be enumerated as below: –
- increase its authorised share capital by such amount as it thinks expedient;
- consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares: Provided that no consolidation and division which results in changes in the voting percentage of shareholders shall take effect unless it is approved by the Tribunal on an application made in the prescribed manner;
- convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination;
- sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;
- 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.
After seeing the above alterations, one thing stands clear and that is that only the alteration concerning such consolidation and division that resulted in change in voting percentage of such shareholders need the approval of Tribunal, and not any other alterations thereby.
These alterations are, however, required to be notified and a copy of the resolution should be filed with the Registrar within 30 days of the passing of the resolution along with an altered memorandum as per Section 64(1).
The Registrar shall record the notice and make any alteration which may be necessary in the company’s memorandum or articles or both.
Procedure for such alteration:
- Section 61 of the Companies Act, 2013, mandates that for increasing the authorised share capital, authorization in Articles of Association is a pre-condition. If there is no such provision then the company has to take steps for alteration of its Articles of Association in accordance with the provision of Section 14 of the Companies Act, 2013, so as to insert the clause enabling increase in the authorised share capital.
- Issue notice in accordance with the provisions of section 173(3) for convening a meeting of the Board of Directors for getting in-principal approval from directors for increasing authorised share capital, fixing date/time/venue of holding EGM of shareholders for getting such approval for passing of such amendment, approve notice of EGM along with Agenda and explanatory statement as per Section 102(1) of CA’13, and finally authorising Director or CS to issue notice of EGM.
- Issue Notice of the EGM to all members, legal representative of deceased member, assignee of an insolvent member if any, directors and the auditors of the company in accordance with the provisions of Section 101.
- To hold the EGM on fixed date and pass the necessary ordinary resolution under section 61(1)(a) for increase in the authorized share capital of the Company.
- File Form SH-7 within 30 days of passing of Ordinary Resolution with the concerned ROC, with prescribed fees and along with following attachments as per the provisions u/s 64 read with Rule 15 of the Companies (Share Capital and Debentures) Rules, 2014: Notice of EGM, Certified True copy of Ordinary Resolution along with the explanatory statement pursuant to Section 102 of the Act, and altered MoA.
- Concerned ROC to thereby verify the e-form and attached documents and to approve such increase in authorize share capital.
- The company then file a notice in the prescribed form with the Registrar within a period of 30 days of alteration to its share capital along with a copy of altered Memorandum as per Section 64.
- There’s no need to file Special Resolution herein, but if in case such alteration of capital clause of MoA requires altering AoA also, then there’s a need to pass a special resolution, and filing MGT-14 with concerned Registrar within 30 days from date of passing of this resolution with prescribed fees.
Note: The above Article is written Ad Verbatim as per the concerned provisions and Rules of Company Law.
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