Page 132 - DCOM106_COMPANY_LAW

Unit 9: Share and Share Capital

A B C D Notes
(a) 2 1 4 3
(b) 1 3 4 2
(c) 2 1 3 4

(d) 4 3 1 2

9.3 Alteration of Capital

Alteration is making changes whether by way of addition, deletion or modification to the
existing thing. Similarly, in case of alteration of Capital Clause it means making changes to the
existing Capital Structure of the company, which may be required at several times and on
several occasions like if company goes for capital restructuring or if it is looking for some extra
funds and the Authorised Share Capital of the Company don’t permit it to do so because of the
limited Capital stated there.

9.3.1 Why alteration is required?

At various instances and occasions there arises a need to alter its various parts in various forms
like increase, subdivision, reclassification, consolidation, conversion, cancellation, reduction
and many more. Generally the people have a misconception that alteration of capital is alteration
of Authorised Share capital but it’s not true at all as alteration can be made at various stages like
by just increasing the paid up capital.

9.3.2 How it is done?

If the alteration is made to any clause other than Authorised Capital then one need not modify
the Charter of the Company i.e., Memorandum of Association of Company and/or Articles of
Association of the Company, as it can just be done either by according the Board Consent or
shareholders Consent as the situation demands. However, if the Authorised Share Capital is to
be altered, a detailed procedure as outlined below has to be followed:
1. Prior Stage: At this stage, the in-house consent i.e., of management is accorded by passing
a Board Resolution by simple majority at a duly convened Board Meeting or either by
circulation. When such consent is attained, then a proper notice is sent to all the shareholders
of the company to intimate them about the ensuing General Meeting for the said purpose.
The Notice is to be attached with the relevant Explanatory Statement.
2. Conduction of Meeting and according the consent of Shareholders: When a proper notice
is sent then comes the stage of convening the meeting, which can be convened only if there
is a proper Quorum. At the meeting one needs to accord the consent of shareholders of the
company by passing an ordinary resolution/or special resolution as the situation demands
like if it’s the case of increase, consolidation, sub-division, conversion or cancellation of
Share Capital under section 94 of the Companies Act, 1956; then ordinary resolution is
required however, in case of reduction of Share Capital under Section 100 of the Companies
Act, 1956, then consent is to be accorded by way of Special Resolution and not only this
along with the special resolution, the consent of court is also required.

3. Proceedings on the consent accorded: Once the consent of the shareholders is accorded and
in case of reduction of share capital, the approval of court is also obtained then the necessary
changes are to be made to the Memorandum of Association of the Company and if required
then to the Articles of Association of the company as well and an intimation to the Registrar

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