{"id":2601,"date":"2019-10-20T04:55:27","date_gmt":"2019-10-20T04:55:27","guid":{"rendered":"https:\/\/commerceiets.com\/?p=2601"},"modified":"2019-10-20T04:55:27","modified_gmt":"2019-10-20T04:55:27","slug":"alteration-of-share-capital","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/alteration-of-share-capital\/","title":{"rendered":"ALTERATION OF SHARE CAPITAL"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_72 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/#ALTERATION_OF_SHARE_CAPITAL\" title=\"ALTERATION OF SHARE CAPITAL\">ALTERATION OF SHARE CAPITAL<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/#PROVISIONS_REGARDING_ALTERATION_OF_SHARE_CAPITAL\" title=\"PROVISIONS REGARDING ALTERATION OF SHARE CAPITAL\">PROVISIONS REGARDING ALTERATION OF SHARE CAPITAL<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/#SECTION_61-_WAY_TO_ALTER_SHARE_CAPITAL\" title=\"SECTION: 61- WAY TO ALTER SHARE CAPITAL\">SECTION: 61- WAY TO ALTER SHARE CAPITAL<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/#SECTION_64-_PASSING_OF_SPECIAL_RESOLUTION\" title=\"SECTION 64- PASSING OF SPECIAL RESOLUTION\">SECTION 64- PASSING OF SPECIAL RESOLUTION<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/#SECTION_64-_NOTICE_TO_REGISTRAR\" title=\"SECTION 64- NOTICE TO REGISTRAR\">SECTION 64- NOTICE TO REGISTRAR<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/#SECTION_99-_RESERVE_CAPITAL\" title=\"SECTION 99- RESERVE CAPITAL\">SECTION 99- RESERVE CAPITAL<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"ALTERATION_OF_SHARE_CAPITAL\"><\/span>ALTERATION OF SHARE CAPITAL<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-medium-font-size\">Alteration of Share Capital refers to the changes in the existing capital structure of the firm. A company can alter its share capital only if it is authorized by its Articles of Association. An article of association is the document framed at the time of incorporation of the company to govern its internal affairs.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">In case of public company, the shares are being subscribed\nfrom the public. So the limited company has to make alteration of the\nmemorandum of association clause also. There is a capital clause in the\nmemorandum of association that contains the details regarding the amount of\nshare capital that can be raised by the company during its lifetime. The capital\nclause has to be get altered by the registrar appointed under Companies Act\n2013.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" style=\"text-align:center\"><span class=\"ez-toc-section\" id=\"PROVISIONS_REGARDING_ALTERATION_OF_SHARE_CAPITAL\"><\/span>PROVISIONS REGARDING ALTERATION OF SHARE CAPITAL<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p class=\"has-medium-font-size\">The following are the provisions regarding the alteration of\nshare capital of the company: <\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"SECTION_61-_WAY_TO_ALTER_SHARE_CAPITAL\"><\/span>SECTION: 61- WAY TO ALTER SHARE CAPITAL<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">Section 61 of the Companies Act, 2013 states the five\ndifferent ways to alter the share capital which are as follows:<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Increase in Authorized Capital: <\/strong>Authorized Capital is also known as Registered or Nominal Capital. This is the capital with which company gets incorporated. The company can increase its share capital by altering its capital clause mentioned in the Memorandum of Association. \u00a0\u00a0<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Consolidation of Shares:<\/strong> The Company can also alter its share capital by consolidating the smaller denominations shares into larger denominations. In case there is any change regarding voting rights of shareholders results out of the consolidation, the permission of the tribunal or court is compulsory. In case of consolidation of shares, the following journal entry is passed:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>Share Capital (Old) A\/c\u00a0\u00a0\u00a0 Dr.<\/strong><\/p><p><strong>\u00a0\u00a0\u00a0\u00a0 To Share Capital (New) A\/c<\/strong><\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><em><strong>EXAMPLE: <\/strong><\/em>A company has 50,000 equity shares of Rs. 10 each fully paid up. A resolution was passed to consolidate the shares into shares of Rs. 100 each. The journal entry to be passed is as follows:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>Equity share capital A\/c (Rs. 10)\u00a0\u00a0\u00a0\u00a0\u00a0 Dr.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 5,00,000<\/strong><\/p><p><strong>\u00a0\u00a0\u00a0\u00a0 To Equity Share Capital A\/c (Rs. 100)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 5,00,000<\/strong><\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\">(Being the consolidation of 50,000 equity shares of Rs. 100\neach into 5,000 shares of Rs. 100 each fully paid up.) &nbsp;<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Sub-Division of Shares: <\/strong>A company can also alter its share capital by sub dividing the value of the shares held by the shareholders. Section 61 allows the company to sub-divide its shares of higher denominations into smaller denominations. The company can do so only if it is authorized by the memorandum of association. In case there is sub-division of partly paid up shares, the condition to be fulfilled is that the difference between the paid up amount and unpaid amount continues to be the same. This way of alteration of share capital results in the holding of more number of shares in the hands of the shareholders with low denomination. The journal entry to be passed in this method is as follows:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>Share Capital (Old) A\/c\u00a0\u00a0\u00a0 Dr.<\/strong><\/p><p><strong>\u00a0\u00a0\u00a0\u00a0 To Share Capital (New) A\/c<\/strong><\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><em><strong>EXAMPLE:<\/strong><\/em> A company has passed the resolution for conversion of 4,000 equity shares of Rs. 10 each and Rs. 80 paid up into 10,000 equity shares of Rs. 40 each and Rs. 32 paid up. The journal entry will be:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>Equity share capital A\/c (Rs. 100)\u00a0\u00a0\u00a0\u00a0\u00a0 Dr.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 3,20,000<\/strong><\/p><p><strong>\u00a0\u00a0\u00a0\u00a0 To Equity Share Capital A\/c (Rs. 40)\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 3,20,000<\/strong><\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\">(Being the sub-division of 4,000 equity shares of Rs. 100\neach Rs. 80 paid up into 10,000 equity shares of Rs. 40 each Rs. 32 paid up)<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Cancel the unissued shares:<\/strong> the company can also cancel its unissued capital. But this does not leads to alteration of share capital. In this method, no journal entry is passed and no treatment is done in the books of the accounts.<\/p>\n\n\n\n<p class=\"has-medium-font-size\"><strong>Conversion of shares into stock: <\/strong>The Company can also alter its shares capital by converting the fully paid up shares into the stock. <a href=\"https:\/\/commerceiets.com\/stock-and-shares\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Stock (opens in a new tab)\">Stock<\/a> is the aggregate of fully paid up shares.\u00a0 The company can do so only if it is authorized by its articles of association. Also the company can re convert its stock into shares.<\/p>\n\n\n\n<p class=\"has-medium-font-size\">The journal entries to be passed are as follows:<\/p>\n\n\n\n<p><strong><em>A) <\/em><\/strong><em><strong>Conversion of shares into stock<\/strong><\/em><\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>Equity share capital A\/c\u00a0\u00a0\u00a0 Dr.<\/strong><\/p><p><strong>\u00a0\u00a0\u00a0 To Equity Capital Stock A\/c<\/strong><\/p><\/blockquote>\n\n\n\n<p><strong><em>B) Conversion of stock into shares<\/em><\/strong><\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>Equity Capital Stock A\/c\u00a0\u00a0\u00a0\u00a0 Dr.<\/strong><\/p><p><strong>\u00a0\u00a0\u00a0\u00a0 To Equity Share Capital A\/c<\/strong><\/p><\/blockquote>\n\n\n\n<p class=\"has-medium-font-size\"><em><strong>EXAMPLE: <\/strong><\/em>A\u00a0 company passed the resolution for conversion of 8,000 shares of Rs. 50 each fully paid into the stock. The journal entry to be passed is as follows:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><strong>Equity share capital A\/c\u00a0\u00a0\u00a0 Dr.\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 4,00,000<\/strong><\/p><p><strong>\u00a0\u00a0\u00a0\u00a0 To equity stock A\/c\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 4,00,000<\/strong><\/p><\/blockquote>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"SECTION_64-_PASSING_OF_SPECIAL_RESOLUTION\"><\/span>SECTION 64- PASSING OF SPECIAL RESOLUTION<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">The company must pass a special resolution in the general\nmeeting to take the consent of the shareholders in the presence of board of\ndirectors regarding the alteration of share capital. The special resolution\nmust contain the details regarding the method to be followed for the alteration\nof share capital along with the value of shares to be altered. &nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"SECTION_64-_NOTICE_TO_REGISTRAR\"><\/span>SECTION 64- NOTICE TO REGISTRAR<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">The company can never alter its capital without providing\nthe details of alteration to the Registrar appointed under the Companies Act, 2013.\nThe company must furnish all the details by filing the e-Form SH-7. The notice\nmust be given to the registrar within 30 days of passing of the resolution.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"SECTION_99-_RESERVE_CAPITAL\"><\/span>SECTION 99- RESERVE CAPITAL<span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p class=\"has-medium-font-size\">The uncalled capital of the company is known as the reserve\ncapital or reserve liability. This capital can be called upon only in the case\nof company being wound up. So while making alteration of share capital, this\ncapital should remain untouched.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>ALTERATION OF SHARE CAPITAL Alteration of Share Capital refers to the changes in the existing capital structure of the firm. A company can alter its share capital only if it is authorized by its Articles of Association. An article of association is the document framed at the time of incorporation of the company to govern&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/alteration-of-share-capital\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;ALTERATION OF SHARE CAPITAL&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":2602,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[102],"tags":[176],"class_list":["post-2601","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-corporate-accounting","tag-provisions-regarding-alteration-of-share-capital"],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2601","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=2601"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/2601\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/2602"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=2601"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=2601"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=2601"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}