Accounts & Compliance

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.

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Changes in Share Capital

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.

Share Capital

The word capital signifies ‘Share Capital’ of the organization where the rupees divided into a predetermined number of shares of a fixed amount. Every company requires cash in the form of share capital to maintain the business. The organization utilizes cash to meet its necessity by the method of gaining business premises and stock-in-trade and so on.

The company which has chosen for expanding its capital, first it has to check 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 having Share Capital if so authorized by 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.

Authorized Capital & Nominal Capital

The provision of section 61 governs the Change in Share capital in the organizations, read with section 13 and 64 of the Companies Act 2013. According to Section 2(8) of the Companies Act, 2013, ‘authorized capital’ or ‘nominal capital’ signifies such capital as approved by the memorandum of a company to be the most considerable measure of the share capital of the organization.

In this way, it is clear that employing the previously mentioned definition, an organization can extend its business up-to the level of authorized capital. If you need to expand your business by infusion of more funds, at that point first, you need to grow your approved capital by following a couple of steps, as discussed ahead.

What are the Characteristics of Change in Share Capital?

• Share Capital is a privilege to a predefined of the share capital, carrying with its specific rights and liabilities.
• According to the Sale of Goods Act, 1930 – Goods implies any movable property other than exceptional cases, money and stock and shares.
• Share Capital is recognized by its number, though this provision will not have any significant impact to a share held by an individual whose name is entered as the holder in the record of depository.
• As well, a share of any part in an organization is a movable property transferable in the way mentioned in the articles of association of the Company.

What are the Kinds associated with Change in Share Capital?

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 Required for General Changes in Share Capital including Annexure-B

• Announcement of EGM with the descriptive statement
• Duplicate of the resolution delivered at the general meeting of the associates
• Modified Memorandum of Association
• Modified Articles of Association
• A valid certified copy of Board resolution for alteration in AOA.
• A valid certified copy of Board resolution for alteration in MOA.
• A valid certified copy of Shareholders resolution.
• Duplicates of audited balance sheets for the past three years
• Resolution for permitting such consolidation or division and providing explanation for the equivalent
• Credentials in proof of new capital arrangement and class of shares presented consolidated or divided
• Affidavit authenticating the petition
• Bank draft substantiating payment of request fee
• The implemented Vakalatnama or Memorandum of appearance with a copy of the Board’s Resolution, whatever is available as per requirement.
• Two additional duplicates of the application
• Any other applicable documents

What is the procedure accompanied for Change in Share Capital

• Issue a Board notice with the agenda of the meeting at least 7 days before the meeting date.
• Hold a Board Meeting
• Pass the Resolution for the Change in Share Capital in the Board meeting.
• The Resolution passed is subject to consent of the Shareholders Meeting.
• For holding a Shareholder Meeting, fix the date, time, and venue for the meeting.
• Director is allowed to send notice for the Shareholders meeting to the Shareholders of the Company.
• The announcement for a Shareholders meeting should be published at least 21 days of the meeting.
• Hold a Shareholders meeting
• Pass the resolution with the permission of the majority shareholders.
• Following the passing of the resolution, Registrar of the Companies (ROC) should get notified about the Change in Share Capital within 30 days of the passing of resolution. If the Registrar is not implicated about the Alteration within 30 days, then the company or its officers will be responsible for paying a fine of up to 10,000for each day of suspension and can be extended to 5 lakhs.

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), in those case (Section 117 of the Companies Act, 2013) the company must be liable for a fine which shall not fall below 5,00,000/- and may reach up to 25,00,000/-. Every officer who is in default will be liable to pay 1,00,000/- and which can be increased to 5,00,000/-.

What are the Extensive Types under Change in Share Capital?

• Authorization in Article Of Association: The article of the organization must contain the arrangements concerning approving it to increase its authorized share capital. If there is no provision in the article, we assist you to modify its article of the relationship as per the arrangement of segment 14 Companies Act 2013.
• Board Meeting: 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.
  3. We will assist you to support one individual either executive of the organization or organization secretary, to notify the regular gathering.
• Notice of EGM: The notification of the additional regular gathering, (EGM) will be given to all the investors and executives of the organization.
• General Meeting: To hold the EGM of the organization on the date chosen.
• Intimation to the ROC: Subsequently, taking approval in shareholder’s meeting, we will help the company to draft the altered MOA to change in share capital. A company has to inform/notify about the same by filing form SH-7with the MCA. Moreover, the form must be submitted in 30 days from the date of resolution.
• Form: We shall be ready will all your compliances such as filing of MGT-14, which is required to filed within 30 days of passing the resolution in the comprehensive gathering. Form SH-7 also needs to be filed within 30 days of passing the resolutions.