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Alternation of Company Capital

A company limited by shares can alter the capital clause of its Memorandum in any of the following ways provided that such alteration is authorized by the articles of association of the company

  • Rise in share capital by such amount as it thinks expedient by issuing new shares.
  • Consolidate and divide all or some of its share capital into shares of larger amount than its existing shares, example, if the company has 100 shares of Rs.10 each (aggregating to Rs. 1000/-) it may consolidate those shares into 10 shares of Rs100 each.
  • Change all or any of its entirely paid shares into stock and re-convert stock into fully paid shares of any denomination.
  • Subdivide shares or any of shares into lesser amounts fixed by the Memorandum so that in subdivision the proportion between the sum paid and the amount if any unpaid on each reduced shares shall be same as it was in case of from which the reduced share is derived.
  • Terminate shares which have been not been taken or agreed to be taken by any person and reduce the sum of share capital by the amount of the shares so cancelled.

The modification of the capital of the company in any of the way specified above can be done by passing a resolution at the general meeting of the company and does not need any confirmation by the court.

Reduction of the share capital can be effected only in the method specified in Section 100-104 of the Act or by way of buy back under Section 77A and 77B of the Act. Notice of modification to share capital is required to be filed with the registrar of the company in Form no 5 within 30 days of the alteration of the capital clause of the MA. The Registrar shall record the notice and make necessary modification in Memorandum and Articles of Association of the company. Any failure in giving notice to the registrar renders company and its officers in default legally responsible to punishment with fine which may extend to the Rs50 for each day of default.

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