Article covers Applicable Provisions for Alteration of Share Capital under Companies Act, 2013, Definition of Alter or alteration, Types of alteration of share capital U/s 61, Draft Of Ordinary Resolutions For Alteration Of Share Capital U/S 61 for a. Increase of authorized capital, b. Consolidation of share capital, c. Sub-division of share capital, d Conversion of fully paid-up shares into stock and e. Cancellation of Shares (in Authorized Share Capital).

Applicable Provisions for Alteration of Share Capital under Companies Act, 2013:

Companies Act, 2013: Sec. 13, 61, 64 of companies Act, 2013

Companies (Share Capital & Debentures) Rules, 2014

Definition of Alter or alteration:

Sec 2(3) “Alter or alteration” includes the making of additions, omissions and substitutions.

Section 61 of Companies Act, 2013 deals with power of limited company to alter its share capital. According to this section a limited company having a share capital may, if so authorized by its articles, alter its share capital by passing an ordinary resolution in general meeting. Such alteration does not require confirmation by NCLT. However, the notice of such alterations shall be given to registrar within 30 days of such alteration in e-form SH-7 with certified true copy of ordinary resolution along with explanatory statement and altered copy of Memorandum of Association.

Types of alteration of share capital U/s 61:

The alteration of share capital may take the following form:

(a) Increase of authorized share capital;

Illustration: The existing authorized capital of Rs. 10,00,000 (consisting of 100,000 equity shares of Rs. 10 each) is increased to 15,00,000 (consisting of 1,50,000 equity shares of Rs. 10 each) by addition of 50,000 equity shares of Rs. 10 each.

(b) Consolidation and division all or any of share capital into shares of a larger amount than existing shares (consolidation and division which results in changes in the voting percentage of shareholders shall require the approval of NCLT);

Illustrations: 2,00,000 equity shares of Rs. 5 each can be divided into 1,00,000 equity shares of Rs. 10 each by consolidating two equity shares of Rs. 5 each which will constitute one equity share of Rs. 10 each.

(c) Conversion of all or any of the fully paid-up shares into stock, and vice versa;

Illustration: Issued, subscribed and fully paid up 10,000 equity shares of Rs. 10 each can be converted into ordinary stock worth of Rs. 1,00,000.

(d) Sub-division of shares, or any of them, into shares of smaller amount than is fixed by the memorandum such that the proportion between the amount paid and the amount unpaid shall remain the same;

Illustration: 10,000 equity shares of Rs. 100 each can be sub-divided into 1,00,000 equity shares of Rs. 10 each in such a way that one equity share of Rs. 100 each will constitute ten equity share of Rs. 10 each.

(e) Cancelation of shares which, 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. (this shall not be deemed as reduction in share capital)

Illustration: Issued, subscribed and fully paid up capital of a company is Rs. 10,00,000 consisting of 100,000 equity shares of Rs. 10 each. The total authorised capital of the company is Rs. 15,00,000 consisting of 1,50,000 equity shares of Rs. 10 each. The equity share capital of Rs. 5,00,000 consisting of 50,000 equity shares of Rs. 10 each being the portion of authorized share capital which have not been agreed to be taken up by any person can be cancelled.

DRAFT OF ORDINARY RESOLUTIONS FOR ALTERATION OF SHARE CAPITAL U/S 61:

a. Increase of authorized capital:

“RESOLVED THAT, pursuant to the provisions of Section 13, Section 61 and all other applicable provisions, if any, of the Companies Act, 2013 read with Companies (Share Capital and Debentures) Rules, 2014 (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), and Article ______ of Articles of Association, the Authorized Share Capital of the Company be and is hereby increased from Rs. 10,00,000 (Rupees Ten Lakhs Only) divided into 1,00,000 (One Lakhs) Equity Shares of Rs. 10 (Rupees Ten only) each to Rs. 20,00,000 (Rupees Twenty Lakhs Only) divided into 2,00,000 (Two Lakhs) Equity Shares of Rs. 10 (Rupees Ten Only) each by the creation of additional capital of Rs. 10,00,000 (Rupees Ten Lakhs Only) divided into 1,00,000 (One Lakhs) Equity Shares of Rs. 10 (Rupees Ten only) each and the Clause 5 of the Memorandum of Association of the Company be altered accordingly.”

“RESOLVED FURTHER THAT, Board of director of the company be and is hereby authorized to make necessary compliance with Registrar of Companies and to do such other acts and deeds as may be necessary for giving effect to this resolution.”

b. Consolidation of share capital:

“RESOLVED THAT, pursuant to the provisions of Section 61, 64 and all other applicable provisions, if any, of the Companies Act, 2013 and the rules framed thereunder (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), and Article ______ of Articles of Association, all the 2,00,000 (Two Lakhs) equity shares of Rs. 5 (Rupees Five Only) each be divided into 1,00,000 (One Lakh) Equity shares of Rs. 10 (Rupees Ten Only) each by consolidating in such manner that every two equity shares of Rs. 5 (Rupees Five Only) each shall constitute one share of Rs. 10 (Rupees Ten Only) each and the Clause 5 of the Memorandum of Association of the Company be altered accordingly.”

“RESOLVED FURTHER THAT, the Board of directors of the company be and is hereby authorized to recall of the existing share certificates, issue of new share certificates in lieu of the existing issued share certificates in terms of the this resolutions and in accordance with the applicable provisions of the Companies Act, 2013 and those of the Companies (Share Capital and Debentures) Rules, 2014.

“RESOLVED FURTHER THAT, Board of director of the company be and is hereby authorized to make necessary compliance with Registrar of Companies and to do such other acts and deeds as may be necessary for giving effect to this resolution.”

c. Sub-division of share capital:

“RESOLVED THAT, pursuant to the provisions of Section 13, Section 61 and all other applicable provisions, if any, of the Companies Act, 2013 and rules framed thereunder (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), and Article ______ of Articles of Association, all the 10,000 (Ten Thousand) equity shares of Rs. 100 (Rupees One Hundred Only) each of the company be and are hereby sub-divided into 1,00,000 (One lakh)  equity shares of Rs. 10/- (Rupees Ten Only) each sub divided in such a manner that one equity share of Rs. 100 (Rupees Hundred Only) shall constitute ten equity shares of Rs. 10 (Rupees Ten Only) each and the Clause 5 of the Memorandum of Association of the Company be altered accordingly.”

“RESOLVED FURTHER THAT, the existing certificates of shares be called back by the Board of Directors and cancelled and that new certificates in respect of the equity shares of Rs. 10 (Rupees Ten Only) each be issued in lieu of the existing equity shares of Rs.100/- (Rupees Hundred Only) each in accordance with the provisions of the Companies (Share Capital and Debentures) Rules, 2014.”

“RESOLVED FURTHER THAT, Board of director of the company be and is hereby authorized to make necessary compliance with Registrar of Companies and to do such other acts and deeds as may be necessary for giving effect to this resolution.”

d. Conversion of fully paid-up shares into stock:

“RESOLVED THAT, pursuant to Section 13, Section 61 and other applicable provisions, if any, of the Companies Act, 2013 and rules framed thereunder (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), and Article ______ of Articles of Association, the consent of the shareholder be and hereby granted for conversion of 10,000 equity shares of Rs. 10 (Rupees Ten Only) each bearing distinctive numbers _____ to _____ (both inclusive) of issued and fully paid up capital into ordinary stock worth of Rs. 1,00,000  (Rupees One Lakh Only) and the Clause 5 of the Memorandum of Association of the Company be altered accordingly.”

“RESOLVED FURTHER THAT, the Board of Directors of the Company be and is hereby authorized to recall of existing share certificates issued in respect of these shares and issue stock certificates representing the value of the shares in question in such units as may be requested by the holders of shares converted.”

“RESOLVED FURTHER THAT, Board of director of the company be and is hereby authorized to make necessary compliance with Registrar of Companies and to do such other acts and deeds as may be necessary for giving effect to this resolution.”

e. Cancellation of Shares (in Authorized Share Capital):

“RESOLVED THAT, pursuant to the provisions of section 13, Section 61 and other applicable provisions, if any, of the Companies Act, 2013 and rules framed thereunder (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), and Article ___ of Articles of Association of the Company, the approval of shareholders be and hereby granted to cancel the 50,000 (Fifty Thousand) equity shares of Rs. 10 (Rupees Ten Only) each out of authorized share capital which have not been agreed to be taken up by any person, be cancelled and accordingly authorized share capital of the Company be diminished from equity share capital of Rs. 15,00,000 (Rupees Fifteen Lakhs Only) consisting of 150,000 (One Lakh Fifty Thousand) of Rs 10 (Rupees Ten Only) each to Rs. 10,00,000 (Rupees Ten Lakhs Only) consisting of 1,00,000 (One Lakh) equity shares of Rs. 10 (Rupees Ten Only) each and the Clause 5 of the Memorandum of Association of the Company be altered accordingly.”

“RESOLVED FURTHER THAT, Board of director of the company be and is hereby authorized to make necessary compliance with Registrar of Companies and to do such other acts and deeds as may be necessary for giving effect to this resolution.”

For any query / information / suggestion, please write at niveditapcs.ngp@gmail.com

(Nivedita Nikam Practicing Company Secretary)

Disclaimer: This Article is meant for knowledge sharing purpose only, prepared and based on the information, provisions available at the time of preparation. For actual implementation, consultation with expert is recommended. The author shall not be responsible for any loss or damages arising out of the implementation or use of the information.

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