Increase / Decrease On Authorized The Share Capital of The Company

Increase/Decrease of authorized share capital

1.Increase of authorized share capital

‘Authorised capital’ or ‘nominal capital’ means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company.
Thus, the Company may, as required extend its business upto the level of authorized capital, which can also be increased with the approval of Registrar of Companies.
The process for increase in authorized share capital is:

1. Step: Holding of Board Meeting for Alteration of object clause in MOA
2. Step: Holding of Extra-Ordinary General Meeting for passing of Ordinary Resolution
3. Step: Filing of Notice to Registrar of Companies of alteration of share capital in form SH-7
4. Step: Incorporating the altered capital in all the copies of MOA.

Documents required for change/ Alteration in Main objects of the Company are:

1. Board’s Resolution
2. Shareholder’s Resolution
3. Altered MOA
4. Any other document as may be required

Taxcellent will help you in alteration of Main objects and will assist in increasing the authorized share capital of the Company.

2. Reduction of authorized share capital

Capital reduction is the process of reducing issued, subscribed and paid-up capital of the Company through share cancellations. The Company can reduce its share capital which is in excess of the wants of the Company subject to approval by the Central Government (NCLT). After a capital reduction, the number of shares in the company will decrease by the reduction amount.
The Company if authorized by its articles of association to reduce the share capital with the consent of its members and approval of the Central Authorities can reduce the capital, following the below procedure:

1. Holding of Board Meeting and Shareholders Meeting for approving the proposal for reduction of share capital.
2. Intimating the intention of the Company for reducing the Capital by filing the shareholder’s resolution with the Registrar of Companies
3. Filing of application for the reduction of Share Capital with the Central Government (NCLT). The application will be annexed with the following documents:

1. 1. List of the Creditors duly certified by the director of the Company.
   2. Certificate of auditors verifying the list of creditors
   3. Certificate by the auditors and declaration by the director that the Company is not in arrears in the repayment of deposits or interest thereon.
   4. Certificate by the auditors that the accounting treatment for reduction of share capital is in conformity with the prescribed accounting standards.
2. The NCLT within 15 days of receipt of application will direct the Company to appraise Registrar of Companies and its creditors within 7 days about reducing the capital and seek their objection if any.
3. The Company shall also publish about the reduction of share capital in the English language in a leading newspaper and in a leading vernacular language newspaper both having wide circulation in the state in which the registered office of the company situated.
4. The objection if any from the Creditors shall be filed within three months from the date of publication.
5. The Company shall authorize a person to represent FMI in the NCLT and attend the hearing.
6. The tribunal may, if it is satisfied that the debt or claim of every creditor of the company has been discharged or determined or has been secured or his consent is obtained, may make an order confirming the reduction of share capital.
7. Once the Company has obtained the approval of reducing the Capital from the NCLT and have paid all its taxes then it can transfer the excess unutilized funds in the accounts of shareholders in their shareholding ratio.
8. Cancellation of old certificate and issuance of new certificate.

Documents required for reduction of share capital:

1. Application for reduction of share capital
2. Copy of Board and Shareholder’s resolution
3. Notice convening EGM and its minutes
4. List of Directors and Shareholders
5. Copy of Memorandum and Articles of Association
6. Copy of latest audited financial statement
7. Valuation report
8. List of creditors with certificate of auditor
9. Consent/ No objection letters of creditors
10. Scheme of Reduction of share capital
11. Proof of submission of copy of petition with ROC & RD
12. Power of Attorney
13. Undertaking
14. Any other document as may be required.

Taxcellent will guide, advise and help you in drafting application, affidavits and other relevant documents for reduction of share capital. Our team of professionals will represent the company in front of authorities and will attend the hearings on behalf of the Company as and when required.