Page 196 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Unit 10: Share Capital

Issued capital. It is that part of the authorised capital which the company has issued for Notes
subscription. The amount of issued capital is either equal to or less than the authorised capital.
Subscribed capital. It is that portion of the issued capital which has been subscribed for by the
purchasers of the company’s shares. The amount of subscribed capital is either equal to or less
than the issued capital.
Called-up capital. The company may not call up full amount of the face value of the shares. Thus,
the called-up capital represents the total amount called-up on the shares subscribed. The total
amount of called-up capital can be either equal to or less than the subscribed capital.
Thus, uncalled capital represents the total amount not called up on shares subscribed and
the shareholders continue to be liable to pay the amounts as and when called. However, the
company may reserve all or part of the uncalled capital, which can then be called in the event of
the company being wound up. For this purpose, a special resolution is required to be passed and
then it is known as Reserve Capital or Reserve Liability (s.99).
Paid-up capital. Paid-up capital is the amount of money paid-up on the shares subscribed.

10.1.1 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 amount as it thinks expedient by issuing
fresh shares;
2. to consolidate and divide all or any of its share capital into shares of larger amount than its
existing shares;
3. to covert 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 five clauses are now explained.
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 fi ne upto ` 50 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

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