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Unit 9: Share and Share Capital

required to be passed and then the uncalled capital is known as Reserve Capital or Reserve Notes
Liability (s.99).
5. Paid-up Capital: Paid-up capital is the amount of money paid-up on the shares subscribed.

9.4.1 Alteration of Share Capital

Section 94 provides that if the articles authorise, a company limited by share capital may, by an
ordinary resolution passed in general meeting, alter the conditions of its memorandum in
regard to capital so as:

1. To increase its authorised share capital by such an amount as it thinks expedient by issuing
fresh shares;
2. To consolidate and divide all or any of its shares into shares of larger amount than its
existing shares;
3. To convert all or any of its fully paid-up shares into stock and reconvert the stock into fully
paid-up shares of any denomination;
4. To sub-divide its shares, or any of them, into shares of smaller amount than fixed by the
memorandum, but the proportion paid and unpaid on each share must remain the same;
5. To cancel shares which, at the date of the passing of the resolution in this behalf, have not
been taken or agreed to be taken by any person.

These clauses are now explained in detail:
1. Increase of Authorised Share Capital: A company, limited by shares, if the articles authorise,
can increase its authorised share capital by passing an ordinary resolution. Within 30 days
of the passing of the resolution, a notice of increase in the share capital must be filed with
the Registrar. On receipt of the notice, the Registrar shall record the increase and also
make any alterations which may be necessary in the company’s memorandum or articles
or both. If default is made in filing the notice, the company and every officer of the
company who is in default shall be punishable with fine up to 500 per day during which
the default continues (s.97).
2. Consolidation and Sub-division of Shares: Consolidation is the process of combining
shares of smaller denomination. For instance, 10 shares of 10 each are consolidated into
one share of 100. Sub-division of shares is just the opposite of consolidation, i.e., one
share of 100 is divided into 10 shares of 10 each. Once a resolution has been passed, a
copy of the resolution is required to be sent within thirty days to the Registrar.

3. Conversion of Shares into Stock and vice versa: Stock is simply a set of fully paid-up
shares put together, and is transferable in any denomination or fraction. On the other
hand, a share is transferable as a whole; it cannot be split into parts. For example, a share
of 10 can be transferred as a whole; it cannot be transferred in parts. But if 10 shares of
10 each fully paid are converted into stock of 100, then the stockholder can transfer stock,
say, worth 17 also.
Section 94 empowers a company to convert its fully paid-up shares into stock by passing
a resolution in general meeting, if its articles authorise such conversion. A notice is to be
filed with the Registrar within thirty days of the passing of the resolution specifying the
shares so converted.
It is to be noted that stock cannot be issued in the first instance. It is necessary to first issue
shares and have them fully paid-up and then convert them into stock. Also, stock can be
reconverted into fully paid-up shares by passing a resolution in general meeting.

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