logo
Company Profile
  • icon
  • icon
  • icon
  • icon

Change in Share Capital : Complete Guide at affordable price

Changing a company’s share capital is a significant corporate action governed by the Companies Act, 2013. It includes alterations like increasing or decreasing authorized capital, consolidation, subdivision, conversion of shares, or cancellation of shares. Proper procedure and timely filings with the Registrar of Companies (ROC) ensure legal compliance and update of company records.

The process of changing share capital is more than a legal formality—it is a critical financial and corporate governance decision. It involves passing a board or special resolution, altering the Memorandum of Association (MoA), issuing new shares, or buying back existing shares, and filing the necessary forms such as PAS-3 (Return of Allotment), SH-7 (Alteration of Share Capital), and relevant filings with the Ministry of Corporate Affairs (MCA). Timely compliance ensures legal recognition of the change, prevents disputes, and maintains transparency with stakeholders.

From a business perspective, altering share capital allows companies to raise additional funds for expansion, repay debts, or restructure ownership, thereby strengthening financial health and operational capacity. It also provides flexibility in managing equity, inviting new investors, rewarding employees through ESOPs, or facilitating mergers and acquisitions. A well-managed change in share capital enhances the company’s credibility with banks, investors, and financial institutions, positioning it for long-term growth and sustainability.

Key Topic Index

  • Types of Share Capital Changes
  • Procedure to Change Share Capital
  • Documents Required for Share Capital Change
  • Compliance and Important Points
  • Frequently Asked Questions (FAQs)
  • Why you should choose Make Merchant to register your business?
table content image

Types of Share Capital Changes

  1. Increase in Authorized Share Capital
    • When a company decides to issue more shares to raise additional capital.
    • Requires an amendment to the Capital Clause in the Memorandum of Association (MOA).
  2. Decrease in Authorized Share Capital
    • Reduction of the capital by cancelling unissued or forfeited shares, or reducing share value.
    • Does not always require NCLT (National Company Law Tribunal) approval if done by alteration of MOA under section 61.
  3. Consolidation of Shares (Share Consolidation)
    • Combining multiple shares into shares of larger denomination to reduce the number of shares.
    • Total share capital remains unchanged.
  4. Subdivision of Shares (Share Split)
    • Splitting existing shares into shares of smaller denomination, increasing the number of shares, keeping total capital same.
  5. Conversion of Shares into Stock and Vice Versa
    • May convert fully paid shares into stock or reconvert stock to fully paid shares.
  6. Cancellation of Shares
    • Shares not taken up or forfeited can be cancelled reducing share capital.
  7. Redenomination of Shares
    • Changing the currency denomination of share capital through a special resolution.

Procedure to Change Share Capital

  1. Step 1: Check Articles of Association (AOA)
    • Confirm AOA authorizes the company to alter the share capital.
  2. Step 2: Board Meeting
    • Issue notice to directors (at least 7 days prior).
    • Discuss and approve proposal for share capital change.
    • Pass Board resolution to convene General Meeting.
  3. Step 3: General Meeting and Special Resolution
    • Call an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM) with proper notice (minimum 21 days).
    • Pass a Special Resolution for alteration of share capital as per Section 61 and 64 of Companies Act.
  4. Step 4: File Form SH-7 with ROC
    • File Form SH-7 with relevant attachments (copy of the special resolution, altered MOA, and AOA) within 30 days of passing the resolution.
    • Pay required filing fees online.
  5. Step 5: ROC Approval and Update Records
    • ROC verifies and records changes.
    • Update statutory registers, share certificates, and communicate with shareholders.

Documents Required for Share Capital Change

  • Notice of Board Meeting
  • Board Resolution
  • Notice of General Meeting
  • Special Resolution passed in General Meeting
  • Certified True Copy of amended MOA & AOA
  • Form SH-7 with attachments
  • Filing fee payment receipt

Compliance and Important Points

  • All changes must comply with Sections 61 and 64 of the Companies Act, 2013.
  • Timely filing within 30 days of resolution is crucial to avoid penalties.
  • If alteration involves reduction of share capital, NCLT approval may be required (depending on method).
  • Shareholder approval threshold is generally 75% majority (special resolution).
  • Changes should be reflected immediately in statutory records and share certificates amended accordingly.

Frequently Asked Questions (FAQs)

No, shareholder approval via special resolution is mandatory.

No, NCLT approval is required only for reduction of share capital, not for increase or subdivision.

Delays can attract penalties and non-compliance status with ROC.

Yes, subject to AOA provisions and necessary shareholder resolutions.

When you want to launch your business, Make Merchant is where it's at!

Altering share capital is a strategic decision affecting business funding and ownership structure. Following correct procedures ensures legal compliance, smooth shareholder communication, and updated company records.

Make Merchant can assist with end-to-end support for drafting resolutions, conducting meetings, and filing necessary forms to manage share capital changes efficiently.

Contact

Get free business consultation Today

We Make Merchant your one-stop solutions- Export to import, we are your support.

logo

We are a one-stop solution for businesses that wish to grow and move from local to global

Contact Info

Office Address

Address: 308, 3rd floor, bheema complex, nirman vihar , east delhi, delhi 110092