Section 61: power to alter share capital

Introduction

Section 61 covers routine capital changes that do not reduce paid-up capital: increasing authorised capital, consolidating shares into larger denominations, converting fully paid shares into stock and back, sub-dividing shares, and cancelling shares that nobody has taken or agreed to take.

The power depends on authority in the articles and is exercised by the company in general meeting. Section 13(1) opens with "Save as provided in section 61", so these capital-clause changes follow section 61 rather than the general special-resolution route for altering the memorandum. Section 61 itself does not specify the type of resolution; check the articles for any stricter requirement.

Key takeaways

Identify the type of alteration

Match the proposal to one clause of section 61(1): (a) increase of authorised capital; (b) consolidation and division into larger shares; (c) conversion of fully paid-up shares into stock and reconversion; (d) sub-division into smaller shares, keeping the same paid and unpaid proportion on each reduced share; or (e) cancellation of shares not taken or agreed to be taken on the date of the resolution.

Anything that reduces issued or paid-up capital falls outside section 61 and is governed by section 66.

• India Code — Companies Act, 2013 (consolidated), section 61
• eGazette — Companies Act, 2013 (18 of 2013) as enacted
• eGazette — Companies (Share Capital and Debentures) Rules, 2014, G.S.R. 265(E) (original notification)

Check the articles and pass the resolution

Confirm that the articles authorise the alteration and record any resolution type they prescribe. The memorandum is altered by the company in its general meeting, so the notice, explanatory statement and minutes should describe the exact change to the capital clause.

Consolidation that changes voting percentages

Under the proviso to clause (b), a consolidation and division that results in changes in the voting percentage of shareholders does not take effect unless the Tribunal approves it on an application made in the prescribed manner. Model each holder’s voting percentage before and after the consolidation, including the treatment of fractions, to decide whether this proviso is engaged.

File the notice under section 64

Every alteration under section 61(1) must be notified to the Registrar within thirty days with the altered memorandum under section 64. Rule 15 of the Companies (Share Capital and Debentures) Rules, 2014, as originally notified, prescribes Form No. SH.7 for this notice; check the current form and fee on the MCA portal before filing.

Amendments and commencement

Section 61 has not been amended since enactment. It came into force on 1 April 2014 under S.O. 902(E), except the proviso to clause (b) of sub-section (1), which came into force on 1 June 2016 under S.O. 1934(E).

• eGazette — S.O. 902(E) dated 26 March 2014
• eGazette — S.O. 1934(E) dated 1 June 2016

Practical preparation

Read the articles; classify the alteration under clauses (a) to (e); model voting percentages for any consolidation; pass the general meeting resolution; apply to the Tribunal if the proviso to clause (b) applies; file the section 64 notice with the altered memorandum within thirty days; update the register of members and share certificates.

Practical checklist

Glossary

Authorised share capital

The maximum share capital stated in the memorandum that the company may issue.

Consolidation

Combining existing shares into shares of a larger amount.

Sub-division

Splitting shares into shares of a smaller amount than that fixed by the memorandum.

Stock

Fully paid-up shares converted into a fund of capital that can later be reconverted into fully paid-up shares.

Frequently asked questions