Amongst the various clause as given under the memorandum of association, the capital clause plays a crucial role in the company. The capital clause of MOA contains the share capital with which the company is registered. Let us continue with the blog and learn about the alteration of the capital clause of a company.
Section 61 read with section 64 prescribes the types of alteration which is allowed to be made in a company. Thus, types of alteration of capital clauses in the general meeting of a company limited by shares as per section 61(1) of the Companies Act 2013 can be enumerated as below :-
- Increase its authorized share capital;
- Consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares.
Note:- For consolidation and division of share capital, approval from the Tribunal is necessary to be taken by filing an application.
- Convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid up shares of any denomination;
- Sub-divide its shares or any of them, into shares of smaller amount than fixed in MOA. However, in sub-division the proportion between the amount paid and the amount unpaid on each reduced share which is same as it was in the case of the share from which reduced shares is denied;
- Cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of the share capital by the amount of the shares so canceled.
Therefore, when any of the alterations is made, it shall be recorded by the registrar for which the company shall send a notice to the registrar. Also, one thing must be noted, the cancellation of shares under Section 61(1) of the Act shall not be deemed to be a reduction of share capital.
Process for change in Authorized Capital Clause
Step 1: Notice of Board Meeting must be delivered at least 7 days prior to the date of BM
Step 2: Conduct a board meeting and pass a special resolution for the following reasons:-
- Alteration of Capital Clause, as required and considering amended set of MOA
- Call a general meeting and approve the notice of such a general meeting
Step 3: Dispatch notice of the general meeting including the explanatory statement and amended set of MOA
Step 4: Conduct a general meeting and pass an ordinary resolution approving the change made in the clause and taking note of the new memorandum of association
Step 5: File e-Form SH-7 within 30 days from the day of passing an ordinary resolution
Step 6: Approval from the Registrar of Companies shall be received after the concerned ROC checks the e-form and the attached documents.
This is a six-step guide that you will be required to follow in case of alteration of capital clause of a company.
Final Words
The clauses as mentioned in the memorandum of association contain fundamentally essential information of the company. Thus, every clause majorly the capital must be altered with due care.
If you have any doubts or need help for altering the capital clause of your company then contact EAdvisors. We will provide you with the best services and that too with the affordability of cost.
