Change in Share Capital in Surat
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Change in Share Capital: Definition, Categories, Advantages & Steps
What does a Change in Share Capital mean?
Share capital stands for the total money shareholders put into a company, split into separate shares of set amounts (in multiples of 5 or 10).Instead of maintaining separate capital accounts for each shareholder, all contributions are collectively recorded in the Share Capital Account.
When a company changes its capital structure, it’s making a shift in its share capital. This happens when they increase or decrease the number of shares they’ve put out there. Companies might do this to grow their business, raise money, or meet certain rules they have to follow.
A Change in Director: What Is It?
The appointment, resignation, removal, or replacement of a director of a firm is referred to as a change in director. Retirement, disqualification, voluntary resignation, or the need for further experience are some of the reasons why this may occur.
Types of Share Capital
To complete the KYC process, directors need to provide:
1. Authorized Share Capital
Also called Nominal or Registered Share Capital.
This is the maximum capital a company can raise, as specified in its Memorandum of Association (MoA).
The company can increase this limit by following legal procedures.
2. Issued Share Capital
The portion of authorized capital that the company has offered for subscription to investors.
This amount can be equal to or less than the authorized capital but never more.
3. Subscribed Share Capital
The part of issued capital that investors have agreed to purchase.
Not all issued shares may get subscribed, but at least 90% of them should be.
4. Called-up Capital
The portion of subscribed capital that the company has requested payment for from shareholders.
It is equal to or less than the subscribed capital.
5. Paid-up Capital
The actual amount paid by shareholders for their subscribed shares.
If any shareholder fails to pay, it becomes a “call in arrears.”
When all dues are cleared, paid-up capital equals subscribed capital.
6. Reserve Capital
A portion of capital reserved for emergencies (e.g., company liquidation).
It cannot be used for regular business activities.
Why Change Share Capital?
Be solvent (not bankrupt)
Have no criminal convictions
How to Increase Authorized Share Capital?
If the director has already completed DIR-3 KYC, they can simply complete WEB-Based Director’s KYC by:
Step 1: Check Company’s Articles of Association (AoA)
Ensure the AoA allows for an increase in capital. If not, the company must amend the AoA before proceeding.
Step 2: Call a Board Meeting
The Board of Directors must convene a meeting to approve the proposal and call an Extraordinary General Meeting (EGM) (if not done at an Annual General Meeting).
Step 3: Conduct the Extraordinary General Meeting (EGM)
Shareholders must receive a notice detailing the agenda, explanations, and proposed resolutions for increasing share capital. Pass a Special Resolution to amend the Memorandum of Association (MoA) and Articles of Association (AoA).
Step 4: File Form SH-7 with the Registrar of Companies (ROC)
Submit Form SH-7 within 30 days of passing the resolution. Pay the necessary fee to the ROC. If capital changes occur due to debenture conversions or government orders, filing SH-7 is mandatory.
Step 5: Pay Stamp Duty & Submit Documents
Stamp duty is payable electronically via the MCA Portal . Required documents include: EGM Notice Certified Copy of the Resolution Altered MoA & AoA
Step 6: File Form MGT-14
Every Special Resolution must be filed with Form MGT-14 within 30 days. The filing should include an explanatory statement under Section 102 of the Companies Act.
Timely filing of DPT-3 ensures compliance, prevents legal risks, and maintains your company’s credibility with financial institutions and stakeholders.
Where to Download Forms?
Get all required forms from the official MCA website: http://MCA.GOV.IN