Increasing / Alteration / Reducing Authorised and Paid-up Share Capital

Share capital is the foundation of a company’s financial structure. Any change in authorised or paid-up share capital must strictly comply with the Companies Act, 2013 and the company’s Articles of Association (AoA).

• Increasing Authorised Share Capital: Authorised share capital is the maximum limit of capital a company can issue. To increase it, the company must first alter the Articles of Association, pass a shareholders’ resolution in a general meeting, and file Form SH-7 with the Registrar of Companies (ROC). This step allows the company to issue additional shares to raise funds.

• Alteration of Share Capital: Alteration may involve consolidation, subdivision, conversion of shares, or reclassification. A board and shareholder resolution is required, followed by filing necessary forms with the ROC.

• Increasing Paid-up Share Capital: Paid-up capital refers to the actual capital received by the company against issued shares. This can be increased by allotting new shares to existing or new shareholders or by converting reserves into equity. Filing of Form PAS-3 is mandatory.

• Reduction of Share Capital: Reduction can be done by canceling unpaid capital, extinguishing shares, or paying back surplus capital. It requires approval from shareholders, confirmation by the National Company Law Tribunal (NCLT), and compliance with creditor protection norms.

Proper compliance ensures legal recognition, transparency, and protection of shareholder and creditor rights.

In conclusion, changes in share capital are crucial for business expansion, restructuring, or financial optimization, and must be carried out with due diligence under the law.