Sections 94, 95, 96, 97 and 100 of the Companies Act, 1956 lay down the procedure for alteration of share capital of companies. According to Sub-section (1) of Section 94 of the Companies Act, a limited company, having a share capital, may, if so authorised by its articles, alter the conditions of its memorandum so as to change its share capital, as follows, that is to say, it may—
(a) increase its share capital by such amount as it thinks expedient by issuing new shares;
(b) consolidate all or any of its share capital into shares of larger amount than its existing shares;
(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. Sub-section (2) of Section 94 lays down that the powers conferred by this section shall be exercised by the company in general meeting and shall not be required to be confirmed by the Court.
A cancellation of shares in pursuance of this section shall not be deemed to be a reduction of share capital within the meaning of the Companies Act. Infact, this is known as dimunition of share capital [Section 94(3)].
Filing of (e-form 5) notice of change in share capital with ROC
Section 95 of the Act makes it obligatory on the part of a limited company having share capital, which has consolidated, sub-divided, converted, re-converted, redeemed any redeemable preference shares, or cancelled any shares otherwise than in connection with a reduction of share capital under Sections 100 to 104, to give notice thereof to the Registrar in the prescribed e-form 5, within thirty days of the passing of the resolution, specifying the shares consolidated, converted, reconverted, sub-divided, redeemed or cancelled and the Registrar shall record the same in the memorandum of the company. This e-form is required to be pre-certified by a professional i.e. Company Secretary/Chartered Accountant/Cost Accountant in whole time practice.
The attachments alongwith e-form 5 are:
1. Proof of receipt of Central Government order
2. Altered memorandum of association
3. Altered articles of association
4. Optional attachment(s) – if any
Note:_ Stamp duty on e-Form 1, Memorandum of Association (MoA) and Articles of Association (AoA) can be paid electronically through MCA portal and in such case submission of physical copies of the uploaded e-Form 1, MoA and AoA to the office of the ROC is not required.
_ Payment of stamp duty electronically through MCA portal is mandatory in respect of the States which have authorized the Central Government to collect stamp duty on their behalf. In respect of the States from whom the authorization is yet to be received, the company will continue to pay stamp duty outside the MCA portal. List of states/union territories for which stamp duty cannot be paid electronically is available on the website of MCA.
_ In case stamp duty is not paid electronically through MCA portal, it is required to deliver simultaneously the original stamped physical copies of the uploaded eForm 1, MoA and AoA along with a copy of challan/receipt in the concerned office of RoC failing which such eForm shall be put into “Waiting for user clarification” in term of Regulation 17 of the Companies Regulations, 1956.
_ Refund of stamp duty, if any, will be processed by the respective state or union territory government in accordance with the rules and procedures as per the state or union territory Stamp Act.