Companies Act Section 61 — Power of limited company to alter its share capital
CHAPTER IV SHARE CAPITAL AND DEBENTURES
Commercial / Corporate
Summary
A limited company that has share capital may change its own founding document (its memorandum) at a general meeting, but only if its articles of association allow it. This power covers five specific types of changes.
Under clause (a) of sub-section (1), the company may increase its authorised share capital by any amount it considers appropriate.
Under clause (b) of sub-section (1), the company may combine and divide all or part of its share capital into shares of a larger value than its existing shares. However, if this combining and dividing changes the voting percentage of any shareholders, it will not take effect unless the Tribunal approves it through an application made in the prescribed manner.
Under clause (c) of sub-section (1), the company may convert all or any of its fully paid-up shares into stock, and may also convert that stock back into fully paid-up shares of any denomination.
Under clause (d) of sub-section (1), the company may split its shares, or any of them, into shares of a smaller value than what is fixed in the memorandum. In doing so, the ratio between the amount paid and the amount unpaid on each new smaller share must be the same as it was on the original share from which it was derived.
Under clause (e) of sub-section (1), the company may cancel shares that, as of the date the resolution for cancellation is passed, have not yet been taken or agreed to be taken by anyone. This cancellation reduces the amount of the company's share capital by the value of the cancelled shares.
Sub-section (2) states that cancelling shares under sub-section (1) is not considered a reduction of share capital.
Official Text
(1) A limited company having a share capital may, if so authorised by its articles, alter its memorandum in its general meeting to—
(a) increase its authorised share capital by such amount as it thinks expedient;
(b) consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares:
Provided that no consolidation and division which results in changes in the voting percentage of shareholders shall take effect unless it is approved by the Tribunal on an application made in the prescribed manner;
(c) convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination;
(d) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so, however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;
(e) 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 its share capital by the amount of the shares so cancelled.
(2) The cancellation of shares under sub-section (1) shall not be deemed to be a reduction of share capital.