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- Change in Share Capital
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Changing the share capital of a company in India involves increasing or decreasing the authorized or issued share capital. This process must comply with the provisions of the Companies Act, 2013. Below are the detailed steps for each type of change:
Increase in Authorized Share Capital
- Check Articles of Association (AoA):
- Ensure that the Articles of Association (AoA) of the company permit an increase in authorized share capital. If not, amend the AoA first by passing a special resolution in a general meeting.
- Board Meeting:
- Convene a Board Meeting: Issue a notice to all directors to convene a board meeting.
- Pass a Board Resolution: Approve the proposal to increase the authorized share capital and decide the amount of the increase. Also, approve the draft notice for an Extraordinary General Meeting (EGM) to get shareholder approval.
- General Meeting:
- Issue Notice: Issue a notice for the EGM to all shareholders, directors, and auditors of the company at least 21 clear days before the meeting. The notice should include the date, time, venue, and agenda of the meeting along with an explanatory statement.
- Pass an Ordinary Resolution: Obtain shareholder approval by passing an ordinary resolution at the EGM.
- Filing with ROC:
- Form SH-7: File Form SH-7 with the Registrar of Companies (ROC) within 30 days of passing the resolution. Attach the following documents:
- Certified copy of the ordinary resolution.
- Notice of the EGM along with the explanatory statement.
- Altered Memorandum of Association (MoA) reflecting the increased authorized share capital.
- Form SH-7: File Form SH-7 with the Registrar of Companies (ROC) within 30 days of passing the resolution. Attach the following documents:
Increase in Issued Share Capital
- Board Meeting:
- Convene a Board Meeting: Issue a notice to all directors to convene a board meeting.
- Pass a Board Resolution: Approve the issue of new shares and decide the terms of the issue. Also, approve the draft notice for an EGM if required.
- General Meeting (if required):
- Issue Notice: Issue a notice for the EGM to all shareholders, directors, and auditors of the company at least 21 clear days before the meeting. The notice should include the date, time, venue, and agenda of the meeting along with an explanatory statement.
- Pass an Ordinary Resolution: Obtain shareholder approval by passing an ordinary resolution at the EGM.
- Allotment of Shares:
- Board Meeting for Allotment: Convene another board meeting to allot the shares to the applicants. Pass a board resolution for the allotment.
- Filing with ROC:
- Form PAS-3: File Form PAS-3 (Return of Allotment) with the ROC within 30 days of the allotment. Attach the following documents:
- Certified copy of the board resolution for allotment.
- List of allottees.
- Copy of the contract, if any, under which the shares have been allotted.
- Form PAS-3: File Form PAS-3 (Return of Allotment) with the ROC within 30 days of the allotment. Attach the following documents:
Reduction in Share Capital
- Check Articles of Association (AoA):
- Ensure that the AoA of the company permit a reduction in share capital. If not, amend the AoA first by passing a special resolution in a general meeting.
- Board Meeting:
- Convene a Board Meeting: Issue a notice to all directors to convene a board meeting.
- Pass a Board Resolution: Approve the proposal to reduce the share capital and decide the amount of the reduction. Also, approve the draft notice for an EGM to get shareholder approval.
- General Meeting:
- Issue Notice: Issue a notice for the EGM to all shareholders, directors, and auditors of the company at least 21 clear days before the meeting. The notice should include the date, time, venue, and agenda of the meeting along with an explanatory statement.
- Pass a Special Resolution: Obtain shareholder approval by passing a special resolution at the EGM.
- Approval from National Company Law Tribunal (NCLT):
- Application to NCLT: File an application with the NCLT for confirmation of the reduction in share capital. Attach the following documents:
- Certified copy of the special resolution.
- Notice of the EGM along with the explanatory statement.
- List of creditors and their consent, if required.
- NCLT Hearing: Attend the NCLT hearing and comply with any directions issued by the NCLT.
- Application to NCLT: File an application with the NCLT for confirmation of the reduction in share capital. Attach the following documents:
- Filing with ROC:
- Form INC-28: File the NCLT order approving the reduction with the ROC within 30 days of receiving the order.
- Form SH-7: File Form SH-7 with the ROC within 30 days of the NCLT order. Attach the following documents:
- Certified copy of the NCLT order.
- Altered MoA reflecting the reduced share capital.
Important Points
- Ensure timely filings with the ROC to avoid penalties.
- Maintain a clear record of all meetings, notices, resolutions, and filings for future reference and compliance audits.
- Comply with all applicable provisions of the Companies Act, 2013, and the rules made thereunder.
- Update all statutory registers, letterheads, and other official documents to reflect the changes in share capital.
By following these procedures, you can ensure a smooth and compliant change in the share capital of your company.