Enquiry form
The amount of capital to invest in the Company is one of the most critical decisions that have to be made by the supporters when a company is in its incorporation stages. As the business begins to pick up, the Company may look to expand its operations, expand in size, scale, or structure. To make that dream a reality, it may require the driving of more funds into the Company, basically increasing/Changing the share capital of the Company. Sometimes, the amount of necessary capital might surpass the limit of the authorized capital at the time.
The authorized capital is the greatest amount of Capital for which the Company can issue shares to the shareholders. As per the Section 2(8) of the Companies Act, 2013, the Authorised Capital limit is specified in the Memorandum of Association under the Capital Clause. A company may take the necessary steps required to Increase/Change the authorized capital limit to issue more shares. However, it cannot issue shares exceeding the authorized capital limit in any case.
The Company having Share Capital if so authorized by the Article of Association, can modify the Share Capital. In this case, the Company needs to follow the technique as recommended under the Companies Act, 2013. For the increase/Change in share capital, it is required to acquire the approval of the registrar of companies by filing required forms.
As provided in Section 61 of the Companies Act, 2013, different types of Change in Share Capital are associated.
Those Are As Follows:-
Kinds Of Change In Share Capital Under Section 61 Of The Companies Act, 2013 Are As Follows:-
Increasing of Authorized Share Capital
The share capital is that portion of a company’s equity, which has been established by issuing shares and exchanging them to stockholders in exchange for capital (cash or other events). Authorized Share Capital means the nominal capital, with which the company was consolidated.
To maintain financial dignity, the government specifies that no company can indiscriminately issue shares to raise capital. To that consequence, authorized share capital is the maximum value of share capital that the company is legitimately authorized to issue to shareholders. The company can increase/Change in share capital by executing Change in Share Capital Clause in the Memorandum of Association.
Consolidation of Share Capital
The company can also fix Change in Share Capital by consolidating the smaller classifications shares into broader classifications. If consolidation and division appears in changes in the voting percentage of shareholders, it must not take effect except the Tribunal confirms it subsequently:
An application must be filled in Form No. NCLT-1 concurrently with the particulars included in Annexure-B.The application must include the following:-
Conversion of Share Capital
The company can go for Change in Share Capital by transforming the fully paid-up shares into the Stock. The re-conversion of the stocks toward fully paid up shares can also be done additionally. The Conversion of loan into equity share capital is the standard & reliable model to raise capital without direct investments. In pursuant to take out a smooth business in India at times, in that case, the debt gets transformed into share capital.
Sub-division of Share Capital
In this prototype, the company sub-divides its shares in a smaller amount than that of what established by the Memorandum of Association. “Subdivision of share certificates” means a separate document needed by a shareholder for a serving of his holding. This is where shareholder demands smaller number of shares than he holds.
Whenever there is a subdivision of shares, the company changes the composition of its share capital by Changing/increasing the number of shares issued initially and decreasing the par value, respectively. Consequently, the value of each share is decreased, and the number of total shares is developed. The class of shares and the full amount of shares announced remain consistent.
Cancellation of Share Capital
If any person does not take shares, and/or diminish the amount of share capital by the number of shares, it is so called Cancellation of Share Capital. The Reduction of Share Capital means reducing issued, subscribed, and paid-up share capital of the company.
Buyback of shares and redemption of Preference Shares is also a reduction of share capital but governed by specific provisions prescribed under Act. Such decreases in the Form of buyback and recovery do not require sanction/approval from Tribunal (NCLT).
The company may reduce the share capital by cancelling any shares which are lost or are unrepresented by available assets. E.g., if the shares of the face value of INR 100, each fully paid-up is represented by Rs. 75 worth of assets. In such a case, reducing the share capital may be affected by cancelling Rs. 25 per share and writing off a similar amount of assets.
The procedure followed for the change in share capital in brief is as follows:
The above forms should get filed with the designated fees by the Ministry of Corporate Affairs. If the Forms discussed above are not registered with the (ROC) Registrar of Companies, in those case (Section 117 of the Companies Act, 2013) the company must be liable for a fine which shall not fall below five lakh rupees and may reach up to 25 lakhs of rupees. Every officer who is in default will be liable to pay 1 lakh rupee and which can be increased to 5 lakhs of Rupees.
The article of the organization must contain the arrangements concerning approving it to increase its authorized share capital.
Notice of the executive gathering will be given to all the top managerial staff according to the arrangement of segment 173(3) of the Companies Act 2013. To gather the executive gathering, the strategy would be:
1) Approval of the executives for increment in approved share capital;
2) Fix day, date, time and setting of holding an additional regular gathering (EGM) of the organization.
The notification of the additional regular gathering, (EGM) will be given to all the investors and executives of the organization.
Copyright registration will establish that you are serious about copyright infringement. This will help impede unauthorized reproduction of the work as it provides the owner with a host of legal remedies.
To hold the Extra Ordinary General Meeting of the organization on the date chosen.
Subsequently, taking approval in shareholder's meetings, company have to draft the altered MOA to change in share capital. A company has to inform/notify about the same by filing form SH-7 with the MCA. Moreover, the form must be submitted in 30 days from the date of resolution.
A modification in the number of shares
If an organization wishes to expand its paid-up capital, it can expand it by offering the Right Issue of shares. The right Issue can be offered to current investors under a plan of workers' investment opportunity, subject to a special resolution passed by the organization.
The measure of share capital can be either expanded or decreased. In either case, the Companies Act manages the methods for such changes. The share capital can be changed via a share issue, Issue of alternative rights or other unique rights, an increment from reserves, or interest in share capital.
Capital reorganization is a critical change in Share Capital to an organization's structure. Capital redesigns include: Reducing share capital. This might be finished by uniting shares, or by lessening the par value of shares.
The fundamental difference between the authorized share capital and paid-up share capital is that the authorized share capital is the most significant value of shares that an organization can issue to its investors. While a Paid-up Capital is the piece of approved share capital for which the shares were given to the investor.
A company can raise share capital from the primary market by means of various methods. The methods may induce public issues, offer for sale, private placement, right Issue, and tender process. This is the most famous method of rising for long term capital. It expresses the raising funds directly from the public.
If the authorized by its articles, a company may utilised any undistributed profits to the company's share premium account or capital redemption reserve to finance an issue of wholly or partly paid-up bonus shares in proportion to their existing holdings.
Single Key Advisory ensures that our clients are delighted every time with our Quality Services, Timely Delivery, Precise
Communication & Professional Approach.