Alteration of Capital
by
Asok Nadhani,
7.1 Alteration
of Capital
A Limited
company may, if so authorised by its Articles, alter its share capital through
an ordinary resolution, in the following ways (Section 94)
a.
increase nominal share capital by
issuing new shares;
b.
consolidate and divide all or
any part of its share capital into shares of larger amount;
c.
convert fully paid-up shares into
stock or vice versa;
d.
sub-divide its shares, into shares of
smaller amount;
e.
cancel shares not taken up.
7.2 Increase in capital
a.
A company may further issue capital by two ways:
i.
by allotment of new shares
ii.
by conversion of debentures or loans into shares.
iii.
Capitalisation of Profit
a.
Issue of Bonus Share
b.
Making a Bonus call
b.
The
company shall file notice of increase in capital to the registrar within 30
days of passing the resolution authorizing the increase. (S. 97)
7.2.1 Issue of Shares at Premium (Section 78)
i.
A company may issue
shares at a price higher than the nominal value (called as issue of share at a
premium) even if such provision is not mentioned in the Articles. Such shares
may be issued for cash or consideration other than cash.
ii.
Securities
premium account: Where a company issues shares or other securities
at a premium, a sum equal to the value of the premium on those shares or
securities shall be transferred to an account called the 'securities premium
account'.
iii.
Utilization of share premium Fund: The share
premium can be used for:
a. issuing fully
paid bonus shares to the members of the company.
b. writing off the
preliminary expenses of the company.
c. writing off the
commission paid or discount allowed on issue of shares / debentures.
d. premium payable
on the redemption of redeemable preference shares or debentures.
e. Buy back of
shares or securities.
7.2.2 Issue of Shares at Discount (Sec. 79)
i.
A company normally cannot issue shares at price
lower than its face value (called issue of shares at discount), except as
provided in Section 79.
ii.
Conditions for issue of shares at a discount: Following
conditions are to be fulfilled to issue shares at discount:
a.
Ordinary resolution must be passed in general
meeting specifying the maximum rate of discount at which the shares shall be
issued.
- The shares
must be of a class already issued.
- The issue
must have been sanctioned by the Central Government.
- The maximum
rate of discount shall not exceed 10 per cent (the Central Government may
sanction a higher rate of discount in special circumstances).
- The company
must have been working for at least a year before it can issue shares at a
discount.
- The shares
shall be issued within 2 months of approval of the Central Government.
- The
prospectus shall contain particulars of the discount allowed on the issue
of the shares or of so much of that discount that has not been written off
at the date of the issue of the prospectus.
iii.
Penalty: In case of
default complying with this provision, the company, and every defaulting
officer shall be punishable with fine extending to Rs.500.
7.2.3 Issue of Rights
Shares [Sec. 81 (1) to (3), 97]
i. A public company
limited by shares may at any time increase its subscribed share capital (within
the limit of authorised capital) by issuing new shares (called rights shares) to its existing equity shareholders
(preference shareholders are not entitled to rights shares).
ii. The existing
equity shareholders shall be offered any further issue of share capital if such
further issue is made after the expiry of 2 years from the formation of the
company, or after the expiry of 1 year from first allotment of shares,
whichever is earlier.(Section 81)
iii. Only equity
shareholders are entitled to receive rights shares.
iv. The Rights
shares are to be issued subject to following rules (Section 81) :
a. Notice of offer. A prior notice
shall be given about the offer of rights shares specifying the number of
shares offered. If the offer is not accepted by the existing shareholders
within 15 days, the offer would be deemed to have been declined.
b. Offer to existing shareholders:
The new shares are to be offered to the existing shareholders on pro rata basis
(in
proportion to the capital paid up on those shares). [Gas Meter Co. Ltd. v. Diaphragm & General Leather Co. Ltd.]
c. Right of renunciation: Shareholders
have the right to renounce
(unless the Articles prohibits such action) all or any of the right shares
offered to them in favour of their nominees. This provision does not apply to a
deemed public limited company (as it may result in violation of restrictions contained
in Section 3 (1) (iii)).
d. Disposal of
unclaimed rights shares: The Board may dispose the right shares refused by
the shareholders, in manner most beneficial to the company.
e. Section 81 is
not applicable in the following circumstances :
–
Where a special resolution u/s 81(IA) is passed in
the general meeting providing that the shares may be offered to the persons
other than existing equity shareholders.
–
Where no such special resolution is passed but the
votes cast in favor of the proposal exceed the votes cast against the proposal
and the Central Government is satisfied that the proposal is most beneficial to
the company [Section 81(lA)]. Opinion of the Central Government is given only
after an application is made by the Board of directors in this behalf.
–
In case of a private company.
–
In case of issue of shares against conversion of
loans or debentures, if relevant conditions are satisfied.
–
If the allotment is made to the creditors in lieu
of payment.
7.2.4 Offer of new shares to outsiders
a.
The new shares of a company may be offered to
outsiders or any persons (including existing shareholders), where: (Sec. 81)
i. a special
resolution to that effect is passed by the company;
ii. an ordinary
resolution is passed and the approval of the Central Government is obtained;
iii. where some
shareholder to whom the shares are offered declined to accept the shares;
iv. the new shares
are issued within 2 years from the formation of the company or 1 year of the allotment
made for the first time;
v. Re-issue of
forfeited Shares.
b.
The provisions of Section 81 do not apply to
increase the subscribed capital of a company due to the exercise of an option
attached to convertible debentures or loans or to subscribe for shares in the
company, provided such term has been approved by :
i.
the Central Government or is in conformity with the
rules, made by the Central Government in this behalf,
ii. a special
resolution passed by the company in general meeting before the issue of the
debentures or the raising of the loans.
c.
Offer to public includes offer to any section
(Shareholders, Debenture holder) etc. (S. 67)
7.2.5 Conversion of
debentures or loans into shares
a.
Order of Central
Government: The Central Government may, in the public interest, order to convert
debentures (issued to Govt. Co. or loan raised from Govt. Co. )
into shares in the company, having regard to the: [S. 81(4) to 81(6)]
o financial
position of the company,
o terms of issue
of the debentures / loans
o rate of interest
payable on the debentures / loans
o capital,
liabilities & reserves of he company & its profits during the preceding
5 years
o current market
price of the shares in the company.
b.
Appeal to Court: If the terms
and conditions of conversion are not acceptable to the company, the company may
appeal to court within 30 days from the date of communication to the company of
such order (or any other further time as granted by the Tribunal). The decision
of the court shall be final and conclusive. [S. 81(7)]
c.
Filing
requirements
i.
The Central Government shall send a copy of order
of conversion to the Registrar as well as to the company.
ii.
Within 30 days of receipt of order of the Central
Government, the company shall file a return with the Registrar showing the
particulars of increase of authorized capital. Thereafter, the Registrar shall
make necessary alterations in the memorandum of the company.
iii.
Where the shares are converted into the shares in
accordance with the provisions of Section 81(4), the requirement of offering
further shares to existing shareholders shall not apply.
d.
Increase of Share capital (Section 94-A)
i. On conversion of
Debentures & Loans to share capital, the Authorised Capital shall stand
increased and the company does not have to go through the usual process of
alteration of memorandum [S. 94A(1)]. Where any public financial institute
proposes such conversion, direction of Central Government is necessary. [S.
94A(2)]
ii. Where the
Memorandum of a company needs to be altered due to such conversion, the Central
Government shall send a copy of the order to the company and to the Registrar
to effect the necessary alterations in the company's Memorandum. [S. 94A(3)]
7.2.6
Issue of Bonus
Share
Bonus shares means distributing the profits of the company, not in the
form of dividend, but in the form of new shares allotted without any
consideration.
i.
A company can issue bonus shares only when authorized
by the Articles of the company.
ii.
Following sources may be used for issue of bonus
shares:
a.
Undistributed profits
b.
Reserves, not set apart for any particulars purpose
c.
Accumulated profits which are free for distribution
of dividend
d.
Securities Premium Account
e.
Capital Redemption Reserve Account.
Thus, Securities premium
Account and Capital Redemption Reserve Account can be used
only for issue of fully
paid up bonus shares and not for making a bonus call.
iii.
The Board shall recommend to the shareholders issue
of bonus shares.
iv.
Bonus shares can be issued through an ordinary
resolution by shareholders at a general meeting.
v.
A listed company proposing to issue bonus shares
shall comply with the following:
–
No company shall, pending conversion of FCDs /
PCDs, issue Bonus shares unless similar benefit is extended to the holders of
such FCDs/ PCDs, through reservation of share in proportion to such convertible
part of FCDs or PCDs.
–
The shares so reserved may be issued at the time of
conversion(s) of such debentures on the same terms on which the bonus issues
were made.
vi.
Only existing fully paid shareholders are entitled
to receive the bonus shares.
vii.
Where the issue of bonus shares has the effect of
increasing the issued capital beyond the authorized capital, the authorized
capital shall first be increased under section 94(1) (a).
viii. The bonus shares
shall be issued only after expiry of 12 months from the date of public issue or
right issue by the company.
ix.
The bonus shares shall not be issued in lieu of
dividends.
x.
Reserves created by revaluation of fixed assets
cannot be used.
xi.
The bonus issue is not to be made unless the
partly-paid shares, if any existing, are made fully paid-up.
xii.
Bonus share can be issued if the Company:
a.
has not defaulted in payment of interest or
principal in respect of fixed deposits and interest on existing debentures or
principal on redemption thereof, and
b.
has sufficient reason to believe that it has not
defaulted in respect of the payment of statutory
dues of the employees such as contribution to provident fund, gratuity, bonus,
etc.
xiii.
The company must issue the shares within a period
of six months from the date of such approval and shall not have the option of
changing the decision.
7.2.7
Bonus Call
a.
Where one or more calls have not been called by the
company on the shares already issued, the company may decide not to receive
cash from the shareholders, but to utilise the free reserves. Thus, a deemed
payment of unpaid amount on the shares is called as a bonus call. So, the
undistributed profits may be utilized towards payment of any call money which
has not been called on any shares held by the members of the company.
b.
All the provisions applicable to issue of bonus
shares shall, so far as may be, apply to a bonus call. However, the company
cannot utilize Securities Premium Account and Capital Redemption Reserve
Account for making a bonus call.
7.2.8
Distinction between Right shares and Bonus shares
|
Basis
|
Right shares
|
Bonus shares
|
|
Authorisation
|
Authorisation
is not required in the Articles.
|
Articles should
have special power.
|
|
Condition of Issue
|
Can be issued
to the existing shareholder irrespective of the paid up value of the shares.
|
Can only be
issued to the existing shareholders where their shares are fully paid up.
|
|
Receipt of Money
|
The company
receives the issue price of the shares.
|
No money is
received from the shareholders on allotment of bonus shares.
|
|
Surrender
|
The existing
shareholder has a right to surrender the shares offered to him.
|
No such right
to surrender the bonus share.
|
7.3 Buy Back of own shares by
Company
i.
No company limited by shares or guarantee and having
a share capital, shall buy its own shares except in the following cases: (S.
77)
a.
a company can purchase its own shares if it is
effected and sanctioned in pursuance of Sections 100 to 104 or Section 402.
b.
a company may purchase its own shares or other specified
securities under section 77A, 77AA, 77B
ii.
An unlimited company can buy its shares without
obtaining any approval of any authority.
iii.
The following cases are not to be considered as
purchase of own shares where the company:
a.
redeems its preference shares
b.
forfeits the shares
c.
accepts a
valid surrender of shares
iv.
A company may buy back its share or other specified
securities out of any of the following Funds. [Section 77-A (1)]
a. free reserves,
b. securities
premium account,
c. proceeds of an
earlier issue made specifically for buy-back purposes.
7.3.1 Rules of
buy-back
a.
The buy back should be authorised by the Articles
of the company.
b.
The company should pass a special resolution by
authorising the buy back (however in following cases, only Board resolution may
be passed):
- The buy-back has been authorized by the Board by means of a
resolution passed at its meeting.
- The buy-back does not exceed 10% of the aggregate of paid-up equity
capital and free reserves.
- No further offer of buy-back shall be made passing a Board
resolution within 365 days.
c.
the buy-back shall not exceed 25 per cent of the
aggregate of paid-up capital and free reserves.
d.
the ratio of the debt (secured and unsecured) owed
by the company is not more than twice the capital and its free reserves after
such buy-back.
e.
all the shares or other specified securities are
fully paid-up.
f.
the buy-back of shares or other specified
securities listed on a stock exchange is in accordance with the regulations
made by the Securities and Exchange Board of India (SEBI).
g.
the buy-back in respect of unlisted shares or other
specified securities is in accordance with the prescribed guidelines. [Section
77-A (2)]
h.
The buy back shall be completed within 12 months
from the date of passing the special resolution or the Board resolution, as the
case may be. [Section 77-A (4)]
i.
The company shall
extinguish and physically destroy the securities bought-back within 7 days of
completion of buy-back. [Section 77-A (7)]
j.
Capital
Redemption Reserve: Where a company purchases its own shares out of free reserves, a sum
equal to the nominal value of share so purchased shall be transferred to
capital redemption reserve account and details of such transfer shall be
disclosed in the balance sheet. (S. 77AA)
k.
The notice of the meeting (at which special
resolution is proposed to be passed) shall be accompanied by an explanatory
statement stating [Sec. 77-A (3)]:
a. a full and complete disclosure of all material
facts.
b. the necessity for the
buy-back;
c. the class of security intended to be
purchased under the buy back;
d. the amount to be invested
under the buy-back; and
e. the time limit for completion of buy-back
7.3.2 Modes of
buy-back
a.
From the existing security holders:
The company may fix a price at which the securities shall be bought back, and
the existing shareholders shall be invited to offer the number of shares they
intend to sell to the company. If the offer for purchase of shares received
from the existing shareholders is more than the number of shares to be bought
back, the company shall purchase the shares from the existing shareholders
proportionately.
b.
From the open market: The company may purchase
the shares from the stock exchange at the prevailing in the stock exchange,
i.e., the market price. But, the company cannot purchase locked-in shares (held
by the promoters etc.).
c.
From odd lots: By securities held by a
member in smaller lots then the marketable lot specified by the stock exchange.
d.
From Employees: Securities issued to
employees by way of stock option or sweat equity.
7.3.3 Buy back records
i.
Maintenance of Buy back
records: Where a company buys back its securities,
it shall maintain a register containing the following particulars [Sec. 77-A
(9)]:
a.
the securities bought back
b.
the consideration paid for the securities
bought-back
c.
the date of cancellation of securities
d.
the date of extinguishing and physically destroying
of securities
e.
other particulars as may be prescribed
ii. Filing of return: The company, after the completion of the buy-back, shall file with the
Registrar of Companies (and to SEBI for listed companies) a return containing
particulars of buy-back within 30 days of such completion. [Section 77-A (10)].
iii.
Penalty: If a company makes default in complying with the provisions of Section
77-A or any rules made thereunder, the company or any defaulting officer shall
be punishable with imprisonment extending upto 2 years and fine upto Rs.50,000
[Section 77-A (11)].
7.3.4
Prohibition for buy-back (Section 77-B)
No company shall
directly or indirectly purchase its own shares:
a.
through any subsidiary company including its own
subsidiary companies
b.
through any investment company or group of
investment companies
c.
where the company has made any default in :
i.
repayment of deposit (or interest thereon)
ii.
redemption of debentures, or preference shares
iii.
repayment of a term loan or interest thereon to any
financial institutions or bank
iv.
Filing of annual return.
(Sec. 159)
v.
Form and contents of
balance sheet and profit and loss account, i.e., presentation of annual
accounts. (Sec. 211)
vi.
Default in payment of
declared dividend within a period of 30 days. (Sec. 207)
7.3.5
Declaration of Solvency (S.77A (6))
a.
Before making its own buy-back, The company shall
file a declaration of solvency with the Registrar and also with SEBI (if listed
in a stock exchange).
b.
The declaration shall be verified by an affidavit
to the effect that the Board of directors, having made a full inquiry into the affairs of the
company, are of the opinion that the Company is capable of meeting its
liabilities and will not be rendered insolvent within a period of one year of
the date of declaration & signed by at least 2 directors of the company including
the managing director.
7.3.6 Subsequent issue
of shares after Buy Back (S. 77-A (8))
i.
The company shall not
make further issue of securities within a period of 6 months of buy back.
ii.
It may however issue bonus shares.
iii.
It may also discharge its subsisting obligations
such as conversion of preference shares or debentures into equity shares.
7.3.7 Loan by a
company to buy its own share (S. 77)
a.
No public company (or private company which is a
subsidiary of a public company), shall give either directly or indirectly, any
financial assistance (whether by way of loan, guarantee, surety or otherwise) in
connection with a purchase of its own shares or shares of its holding company,
except in the following cases:
- a banking
company may lend money in the ordinary course of its business
- a company
may formulate a scheme (e.g. a welfare scheme) under which the trustees
may purchase fully paid shares for the benefit of the employees.
- a company
may make loans (not exceeding 6 months of salary or wage) to the employees
(other than Manager or Director) to purchase its fully paid shares.
- A holding
company giving loan for purchase of shares of its subsidiary company.
- It is
lawful for a company to give loan to a person (for any other purpose),
even though the company receives its own shares as security.
b.
A private company may give financial assistance to
any person for purchase of its own shares or shares of its holding
company.
c.
For any contravention of the provision under
section 77, the company and every officer of the company may be liable to a
penalty upto Rs.10,000.
7.4 Reduction of Capital
a.
The reduction of capital may take place in following
ways: (S. 100 to 104)
i. reduction of
Capital with consent of Tribunal
ii. reduction of
Capital without sanction of Tribunal.
b.
Sections 100 to 104 apply
to-
i.
a company limited by
shares; and
ii.
a company limited by
guarantee and having share capital.
7.4.1 Reduction of Capital with consent of Tribunal
a.
The reduction of share capital may be done subject
to : (Sec. 100 to 103)
i. Special
resolution (Sec. 100). A company may
pass a special resolution for reduction of capital.
ii. Application to the Tribunal
(Sec. 101). The company shall then apply to the Tribunal by
petition for an order confirming the reduction.
b. A company,
having share capital, limited by shares by guarantee, may reduce its share
capital subject to confirmation by the Tribunal, in any of the following ways:
1. extinguish or reduce the
liability on any of its shares in respect of share capital not paid up. Ex.7.1
2. cancel any paid-up
share capital which is lost or is unrepresented by available assets. Ex.7.2
3. Pay off
any paid-up share capital which is in excess of the needs of the company.
Ex.7.3
4. Purchase of shares by the company. (Sec. 402 (b)) Purchase shares of any members, on the order of the
Tribunal.
7.4.2 Reduction not amounting to Reduction of capital
The following cases results in, directly or indirectly, reduction of paid
up capital of the company but, legally speaking, do not amount to reduction of
capital, and consequently, the procedure prescribed under section 100 to 104
need not be complied in such cases:
i.
Where Company Law Board
order a company to purchase the shares of one or more members in order to end
the oppression or mismanagement, and to effect consequent reduction of share
capital (Section 402). Such purchases of shares of a member by the company though
involves reduction of capital, but does not require the compliance of procedure
prescribed under section 100 to 104.
ii.
Buy-back of shares:
A company may buy-back its own shares, subject to
fulfillment of conditions laid down in Sec.79-A(2), without requiring
compliance of Sections 100 to 104 (Section 77A).
iii.
No reduction of capital
takes place in the following cases:
a.
Redemption of redeemable preference shares: A company may redeem its preference share capital without complying with
the provisions of sections 100 to 104 (since an amount equal to nominal value
of preference shares redeemed must be replaced by the company, either by way of
issue of new share capital or by way of transfer of profits to capital
redemption reserve).
b.
Forfeiture of shares: The company may
(if authorised by its Articles), forfeit shares for non-payment of calls. This
results in reduction of capital if the forfeited shares are not re-issued.
c.
Surrender of shares: The company may
accept surrender of partly paid shares to avoid formalities of forfeiture.
d.
Cancellation of shares: The company may (if so
authorised by its Articles), cancel shares which have not been taken or agreed
to be taken by any person and reduce the amount of its share capital by the
amount of the shares so cancelled.
7.4.3 Liability of members in respect of reduced
shares (sec. 104)
Due to reduction of
capital, the liability of members (past or present) in respect of reduced shares,
shall not exceed the difference in amount between paid-up value of the share
and the reduced value of the share.
7.4.4
Interest of Stakeholders (Sec. 101)
Reduction of capital may
lead to conflict of interests between the shareholders and the creditors. Such
conflict must be settled by Tribunal, who will look into their interests in the
following manner.
a. Interest of
Creditors (Sec. 101)
i. Where it
involves reduction of liability on any shares in respect of unpaid capital, or repayment
of amount already paid on any share, a creditor
may raise objection to the reduction of capital
ii. The Tribunal
shall settle a list of creditors who are entitled to object and publish
a notice to submit their claim
iii. Where a creditor
entered on the list does not consent to reduction (and his debt is not
discharged or determined by the company ), the Tribunal may either:
a.
have his interest secured, or
b.
dispense with the consent when the Tribunal thinks
that their interest are not affected (e.g. the company has deposited sufficient
money to satisfy claims likely to be made against it).
b.
Interest of Shareholders
Where creditors
are not affected (i.e., where it does
not involve the diminution of liability of shareholders in respect of unpaid
capital or the payment to any shareholder of any paid-up capital), Tribunal
would see whether the reduction is fair and equitable as between the different
classes of shareholders , while considering its consent to the reduction of
capital.
c.
Change in Name
The Tribunal may
add ‘and reduced’ as the last word to
the name of the Company for a specified time, as warning to the public of the
financial position of the company. The company may also be directed to publish
reasons for the reduction of capital for public information (s.102).
7.4.5
Registration of order of Tribunal with Registrar (Sec. 103)
i.
The order of the Tribunal confirming the reduction
shall be produced before the Registrar and a certified copy and a minute
(approved by the Tribunal) shall be filed with him for registration, stating:
a. the amount of
the share capital, amount of each share and the number of shares into which it
is to be divided,
b. the amount
deemed to be paid on each share, if any, at the date of the registration.
ii. The reduction of capital takes effect on its registration.
A notice of the registration shall be published as directed by the Tribunal.
iii. The Registrar
shall certify the registration of the order. Such certificate shall be
conclusive evidence that all the requirements of the Act with regard to
reduction of share capital have been complied with.
7.4.6 Penalty for non compliance for reduction of
capital (Sec. 105)
a. Any officer of
the company shall be held liable for:
i. knowingly
obscuring the name of any creditor entitled to object to the reduction;
ii. knowingly
misrepresenting the nature or amount of the debt or claim of any creditor,
iii. supporting to concealment
or misrepresentation
b. The defaulting
officer may be liable to imprisonment upto 1 year and / or fine.
7.5 Diminution
of capital
Diminution of
capital denotes cancellation of shares which have not been taken up by any
person or unsubscribed part of issued capital. It is also a sort of reduction
of the issued capital. However, diminution does not amount to a reduction of
capital u/s 100.
7.5.1 Difference between reduction of capital and diminution of capital
|
Basis
|
Reduction of capital
|
Diminution of capital
|
|
Authorised capital
|
It may or may
not decrease the authorised capital and so it may or may not lead to
alteration of capital
|
It results in
decrease of such portion of authorised capital which is issued but remains
unsubscribed and so it results in alteration of capital.
|
|
Method
|
It is done by –
a.
return of excess capital,
b.
cancellation of the paid up capital.
|
It is done by
cancellation of shares which have not been taken up by any person.
|
|
Consent and interest of
creditors
|
Consent of
creditors is needed as their interests are affected.
|
No consent is
needed as the interests of creditors are not affected.
|
|
Resolution
|
A special
resolution is required.
|
An ordinary
resolution is required.
|
|
Notice to Registrar
|
Necessary
documents are to be submitted to the Registrar.
|
Notice of
cancellation of capital is to be given to the Registrar
|
|
Alteration in the name of
the company
|
The word ‘and
reduced’ may be added to the end of the company name by the Court’s offer.
|
Diminution of
capital does not involve any change in the name of the company.
|
|
Confirmation
of Court
|
Confirmation of Court is required.
|
No confirmation by Court is required.
|
|
Capital
Clause of memorandum
|
Reduction may or may not result in alteration of capital clause in
memorandum. Whenever, liability of members is not extinguished, the
alteration does not result in alteration of capital clause.
|
Diminution of capital necessarily results in alteration of capital
clause of memorandum.
|
Examples:
Reduction of liability on shares
Ex.7.1 X Limited has a share capital
consisting of shares of Rs.100 each. Rs.70 per share being paid up. The
directors feel the company would not require the uncalled amount of Rs.30 per
share. The company may extinguish the remaining liability of uncalled share
capital at the rate of Rs.30 per share.
[Ref. 7.4.1{b(1)}]
Cancellation of
paid-up share capital
Ex.7.2 Due to heavy trading
losses, Y Limited reduces its equity shares of Rs.10 each fully paid-up, to Rs.4
per share. If the company extinguishes liability on these shares then Rs.10 shares
will become shares of Rs.4 each fully paid-up or else it will continue to be
shares of Rs.10 each, Rs.4 per share paid up. [Ref. 7.4.1{b(2)}]
Pay off paid-up
share capital
Ex.7.3 Z Limited has equity
capital consisting of Rs.10 shares fully paid-up. The capital is in excess of
the requirements of the company. The company returns Rs.4 per share. If the
company extinguishes liability on these shares then Rs.10 shares will become
shares of Rs.6 each fully paid-up. If it does not extinguish liability on these
shares then Rs.10 shares will continue to be shares of Rs.10 each, Rs.6 per
share paid up. [Ref. 7.4.1{b(3)}]
For more details, refer to Business & Corporate Laws, by
Asok Nadhani, BPB Publications-ww.bpbonline.com, bpbpublications@gmail.com
