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Change in Share Capital

Change in share Capital online India paves the way to grab all the benefits from the investors by Changing the Company’s share Capital! Ritedger professionals team will help and guide you to plan smoothly at the least cost, ensuring the successful completion of the Change in share Capital online India – step by step process. Share Capital of the company is the amount of investment used as a capital to start a business and it can be used in critical situations.

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Overview
Characteristics
Required Documents
Procedure
FAQ

Change in Share Capital - Overview

The amount of investment used as a capital to start a Company is one of the most critical points where the decisions must be made by the supporters very carefully as it is the crucial place where the company is in its registration stage. As the business starts to pick up, the Company may find a way to expand its business operations, expand in scale, size, or structure. To make that ambition a reality, it may require more funds and investments, generally, it is known as increasing or Changing the share capital of the Company. Sometimes, the number of necessary funds might exceed the limit of the capital which has been authorized at the time.

The authorized capital is the important amount of investment where the Company can go for an option to issue the shares to the shareholders. According to Section 2(8) of the Companies Act, 2013, the Authorised Capital limit is mentioned in the Capital Clause Of the Memorandum of Association of the company. At this point, the company has to take the necessary steps to Increase or to Change the authorized capital limit so that it can issue more shares. However, the company cannot grant shares exceeding the authorized limit at any point.

Meaning of Share Capital

The word capital means 'Share Capital' of the company where the amount divided into a preset number of shares into a fixed amount of shares or amount. Every Company needs cash in the form of share capital to keep up their business activities. The company utilizes cash to proceed with its necessary activities to gain in business premises, stock-in-trade and so on.

The Company which has chosen for expanding its Capital, the first thing that it has to check is the current Authorized Share Capital. It is because the Company can't give the shares past the authorized Share capital in any way, for issuing the shares it is required to increase the authorized share capital by changing the Memorandum of Association of the Company.

The Company owning Share Capital if so passed by the Article of Association can alter its Share Capital. In this case, the Company requires to follow the procedure as per the Companies Act, 2013. For the increase or change in the share capital of the company, it is required to obtain the approval by filing required forms to the registrar of companies.

Characteristics of Change in Share Capital

  • As per the Sale of Goods Act, 1930 – Goods involves any movable property other than special cases, money and stock and shares.
  • Share Capital is an exclusive right to predefined money of the share capital, holding with its specific rights and financial obligation.
  • Share Capital is distinguished by its number, even though this proviso will not have any substantial impact to a share amount held by a person whose name is enrolled as the owner of that particular share in the record of a depository.
  • Also, a share of any part in the company that is the movable property and it can be transferable in the way mentioned in the AOA of the Company.

As provided in Section 61 of the Companies Act, 2013, different types of Change in Share Capital are associated. Those Are As Follows:-

  • Increase in ‘Authorized’ Share Capital;
  • Combination and division all or any of the Share Capital into shares of bigger amount than existing Share;
  • Convert all or any of its completely settled up shares into the stock and re-convert that stock into the completely settled up portions of any division;
  • Sub-Division of its shares, into the portions.
  • The reduction of shares.
Documents needed for General Changes in Share Capital
  • Declaration of EGM with the descriptive report;
  • Altered MOA or Memorandum of Association
  • Duplicate of the resolution passed at the general meeting of the associates;
  • Modified AOA or Articles of Association
  • Certificate as a proof of new capital arrangement and class of shares introduced consolidated or divided;
  • A certificate copy of Board resolution for modified in AOA
  • A copy of Board resolution for modified in MOA
  • A valid certified copy of the resolution of Shareholders
  • Two duplicate copies of the application
  • Copies of audited balance sheets for the preceding three years;
  • Resolution for allowing such consolidation or division and furnishing explanation for the equivalent;
  • Legal document authenticating the petition.
  • Bank draft confirming the payment of request fee.
  • The enforced Vakalatnama or Memorandum of appearance along with a copy of the Board's Resolution, whatever is needed
  • Any other required documents
Procedure to Change the Authorized Capital

Read-through of the Articles of Association

The AOA or Articles of Association is the official document which contains the rules and regulations of the internal working of the organization. Therefore, it is better to verify the Articles of Association before taking action regarding the increase or reduction in the authorized capital, to check whether any rule exists that gives away or an option to a change in the capital of the company.
If such provision exists in AOA, then the process becomes very simple. But if the provision does not exist, then first the company has to amend the Articles of Association under Section 14 of the Companies Act, 2013 (‘Act”), and then the company can proceed with the modification of authorized capital.

Conducting the Extraordinary General Meeting

After the meeting, the increase in the share capital matter is submitted forth. The voting process then is conducted in a preset manner to conclude regarding the share capital matter. After getting the approval, and the resolution is authorized, the explanatory report is attached, and the increase in the Share Capital is made.

Filing with the Registrar of Companies

Within 30 days of the resolution being authorized, a company should file eForm SH-7 and eForm MGT – 14 (if applicable) attached with all the documents and prescribed fees with the Registrar.

  • 1. Form MGT – 14: This form has to be submitted to the RoC within 30 days of passing the increase in share capital resolution.
  • 2. Form SH – 7: This form has to be submitted to the RoC within 30 days of passing the increase in share capital resolution. The main aim of this form is to suggest the Registrar regarding the information about the increase in the authorized capital of the company.  The forms must be filed within the stipulated time period  in order to stay away from penalties or subsequent punishment

Board Meeting to be conducted

  • Formal notice to be sent to all the directors mentioning the agenda of the meeting at least 7 days earlier to their respective registered addresses.
  • At the Board Meeting, a Special Resolution to call for an EGM and issue notice consistent with the provision of Section 101 of the Act, where the altered object clause on authorized capital in the MOA of the company can be submitted for approval by authorizing an Ordinary Resolution. The proposed change shall be as per the provisions of Section 60 of the Act.
  • Notice to be presented to the shareholders concerning the particulars of the board meeting, that includes the agenda, time, date and venue of the meeting.
  • The notice must mention the method of voting in which way the resolution is passed at the Extraordinary General Meeting.
  • Notice of the EGM is to be granted to all of the following:-
    1. Directors
    2. Shareholders
    3. Auditors
  • The notice of the Extraordinary General Meeting. has to be given 21 days prior to the date of the EGM is to be held.

Frequently Asked Questions

Change in Share Capital means modification in the number of shares
If a company wishes to expand its share capital, it can expand it by providing the Right Issue of shares. The right Issue can be provided to current promoters or investors under a plan of employers' investment opportunity, after passing a special resolution by the organization.
Increase or change in Share Capital is a critical change to an organization's structure. Capital restyling or redesigning includes reducing or increasing share capital. This might be completed by combining shares, or by decreasing the par value of shares.
A company can raise capital investment from the primary market through various methods. Some of them induce public issues, private placement, offer for sale, right Issue, and tender process.
If authorized by its articles or AOA, a company may utilise its share premium account or capital redemption reserve to fund a business issue of wholly or partly paid-up bonus shares in ratio to their existing shareholdings.
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