What is meant by Alternation of Share Capital?

What is meant by Alternation of Share Capital? What are the various ways of altering the share capital of a company? What are legal provisions of alternation of share capital?

Ans.

MEANING OF ALTERATION OF SHARE CAPITAL

A public company commences its business with a certain amount of share capital, but after a certain period, requirement arises to alter it. A company can increase or decrease or reorganize its share capital. It is known as alteration of share capital. According to Section 61 of the Companies Act, 2013 a limited company having a share capital may, if so authorized by its AOA, alter its share capital.

WAYS OF ALTERING THE SHARE CAPITAL

According to Section 61(1) a company with a limited liability and having a share capital can alter its share capital in any ways of the following –

(1) Increase in Share Capital – Company may increase its share capital by such amount as it thinks expedient by issuing new share.

(2) Consolidation – A company may consolidate and divide all or any of its share capital into shares of larger amount then its existing shares.

(3) Conversion of Shares and Stock – A company may convert all or any of its fully paid-up shares into stock, and re-convert that stock into fully paid-up shares of any denomination.

(4) To cancel the Unissued Shares – A company may cancel shares which at the date of 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. The objective of it may be to get rid of unissued shares.

LEGAL PROVISIONS FOR ALTERATION IN SHARE CAPITAL

Section 61 empowers a public company, limited by shares and a public company limited by guarantee, having share capital to alter their share capital. For it the company is to follow the following provisions (procedure)-

(1) Authorization by Articles of Association – For alteration of share capital the company must be authorized by its articles of association. If company is not authorized to do so, it will have to make the alteration in its AOA by passing a special resolution in the general meeting of the company.

(2) Passing a Resolution – Accounting to Section 61 a company should pass an ordinary resolution to that effect to make an alteration in the share capital of the company.

(3) Obligation to Inform the ROC- The company is to inform the ROC regarding the alteration in the share capital of the company within 30 days of the change.