Procedures under Companies Act, 2013

Consolidation and Division of Share Capital of a Company into Shares of Larger Amount, without prior approval of Tribunal

In accordance with the provisions of Section 61(1) (b) of the Companies Act, 2013 a limited company having a share capital may, if so authorized by its articles, alter its memorandum in its general meeting to consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares.

Provided that no consolidation and division which results in changes in the voting percentage of shareholders shall take effect unless it is approved by the Tribunal on an application made to it. [Proviso to Section 61(1)(b)]

Key Considerations:

  • Company can consolidate and divide its shares into shares of larger amount only if it is authorized by its Articles of Association and after obtaining approval of members by ordinary resolution. (Section 61(1)

  • Company shall ensure that proposed consolidation and division of shares shall not result in change in the voting percentage of shareholders.Otherwise, Company shall be required to approach Tribunal (at present, Company Law Board) seeking permission for proposed consolidation and division of shares resulting in change in the voting percentage of shareholders (Proviso to Section 61(1)(b))

  • A company may replace all the existing certificates by new certificates upon consolidation and division of shares subject to compliance with prescribed rules.

The following procedure is to be followed for altering authorized share capital of a Company by consolidating and dividing its shares into shares of larger amount, without prior approval of Tribunal under Section 61 and 64 read with Rule No. 15 of Companies (Share Capital and Debentures) Rules, 2014-

1. Check whether Articles of Association of Company contain a provision authorizing it to consolidate and divide its share capital . If there is no such provision then Articles have to be altered in accordance with Section 14 of Companies Act, , 2013 to include such authorisation. [Pl. Refer Procedure for Alteration of Articles]

2.A: If resolution for consolidation and division of share capital is proposed to be considered at BM:

2.A.1 Issue not less than 7 days notice and agenda of Board meeting, or a shorter notice in case of urgent business, in writing to every director of the company at his address registered with the company and call a Board Meeting to consider the proposal for consolidation and division of Share Capital of the Company into shares of larger amount (Section 173(3). Also follow the procedure prescribed for issuing, signing of notice and convening of Board Meeting.

2.A.2 Hold a meeting of Board of Directors-

  • To pass the necessary Board Resolution for approving the consolidation and division of share capital of a Company into shares of a larger amount, subject to the approval of shareholders in general meeting. If the consolidation and division of share capital results in change in voting percentage of shareholders, Company is required to approach Tribunal seeking permission for such consolidation. (Pl. refer procedure for making an application to Tribunal(Company Law Board) for consolidation and division of share capital).

  • To authorize the Director/Company Secretary to sign and file the form required to be filed for consolidation and division of share capital of a Company into shares of a larger amount with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to the consolidation and division of share capital on behalf of the Company.

  • To fix day, date, time and venue for holding general meeting of the Company for passing Ordinary Resolution for consolidation and division of share capital of the Company into shares of larger amount. [Section 61(1) (b)]

  • To approve the draft notice of general meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013.

  • To authorize the Director or Company Secretary to sign and issue notice of the general meeting.

  • To authorize Directors and Company Secretary/any other person to sign and issue the share certificate to the existing members upon consolidation and division of share capital. (Rule 5(1)(a) and Rule 5(3) of the Companies (Share Capital and Debentures) Rules, 2014] (It is not mandatory to replace the existing certificates upon consolidation and division of share capital)

2.B: If resolution for consolidation and division of share capital is proposed to be considered by circulation:

2.B.1 The Chairman of the Board or in his absence, the Managing Director or in his absence, the Wholetime Director and where there is none, any Director shall decide, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation. (Point 6.1.1 of Secretarial Standards -1)

2.B.2 The draft resolution for consolidation and division of share capital of a Company into shares of smaller amount, subject to approval of shareholders at general meeting of the company, together with necessary papers shall be sent to all the Directors individually on the same day by hand/speed post/registered post/courier/e-mail/any other recognised electronic means to his email or postal address registered with the Company and in the absence of such details, to any address appearing in DIN registration details of the concerned Director. (Point 6.2.1 and Point 6.2.2 of Secretarial Standards -1)

2.B.3 The proposed agenda shall be explained by a note setting out the details of the proposal, relevant material facts that enable the Directors to understand the meaning, scope and implications of the proposal, the nature of concern or interest, if any, of any Director in the proposal, which the Director had earlier disclosed and the draft of the Resolution proposed. The note shall also indicate how a Director shall signify assent or dissent to the Resolution proposed and the date by which the Director shall respond. (Point 6.2.3 of Secretarial Standards -1)

2. B.4 Directors shall not be given more than seven days from the date of circulation of the draft of the Resolution, to respond. (Point 6.2.3 of Secretarial Standards -1)

2.B.5 If min. 1/3rd of Directors require the Resolution under circulation to be decided at a Meeting, the Chairman shall put the Resolution for consideration at a Meeting of the Board. (Point 6.1.2 of Secretarial Standards -1)

2.B.6 The Resolution is passed when it is approved by a majority of the Directors entitled to vote on the Resolution, The Resolution, if passed, shall be deemed to have been passed on the last date specified for signifying assent or dissent by the Directors or the date on which assent from more than two-third of the Directors has been received, whichever is earlier, and shall be effective from that date, if no other effective date is specified in such Resolution. (Point 6.3 of Secretarial Standards -1)

2.B.7 Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the Minutes of such Meeting. (Point 6.4 of Secretarial Standards -1)

3. Prepare and circulate draft minutes within 15 days from the date of the conclusion of the Board Meeting, by hand/speed post/registered post/courier/e-mail to all the Directors for their comments. Alsofollow the procedure prescribed for preparing, circulation, signing and compiling of Board Minutes.(Secretarial Standards-1 )

4. Send notice of the General meeting proposing the ordinary resolution to all the shareholders, directors, auditors and other persons entitled to receive it, by giving not less than clear 21 days notice or a shorter notice, if consent for shorter notice is given in writing by at least 95% of members entitled to vote at such meeting, either in writing or through electronic mode (Section 101). Also follow the procedure prescribed for issuing, signing of notice and convening of General Meeting.

5. Hold the general meeting on the day fixed for the meeting and pass the Ordinary Resolution under Section 61(1) (b) for consolidation and division of share capital of the company, by simple majority in accordance with Section 114(1) of the Act.

6. Follow the procedure prescribed for preparing, signing and compiling of minutes of General Meeting.

7. File a notice of consolidation and division of share capital with the Registrar in E-Form No. SH.7 within 30 days of passing of the resolution for such consolidation. [Section 64(1) & Rule No. 15 of Companies (Share Capital and Debentures) Rules, 2014]

The following documents are required to be attached to E-Form No. SH.7:

    (a) A certified true copy of Ordinary Resolution for consolidation of share capital;

    (b) A copy of the order of the Tribunal; if any

    (c) Altered MOA;

    (d) Altered AOA, if any

    (e) Notice of General Meeting along with the explanatory Statement

    (f) Consent for shorter notice, , if meeting was convened at shorter notice

    (g) Any other document, as may be applicable.

8. In case the Company decides to replace all the existing certificates by new certificates upon consolidation and division of share capital, Company shall issue share certificates to the existing members in Form SH-1 or as near thereto as possible. [Rule No. 6(1)(c) of Companies (Share Capital and Debentures) Rules, 2014 read with Rule 5(2) of Companies (Share Capital and Debentures) Rules, 2014].

9. Share certificate shall specify the name(s) of the person(s) in whose favor the certificate is issued, the shares to which it relates, the amount paid-up thereon and the fact that Issued in lieu of share certificate No..... sub-divided/replaced/on consolidation. (Rule 5(2) and Rule 6(1)(b) of Companies (Share Capital and Debentures) Rules, 2014

10. Share certificate may be issued under the seal of the Company, if any which shall be affixed in the presence of, and signed by:

(a) two directors duly authorized by the Board of Directors or the committee of the Board, if so authorized by the Board; and

(b) the secretary or any person authorised by the Board.

In case the company does not have a common seal, the share certificate shall be signed by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.

If the composition of the Board permits, at least one of the aforesaid two directors shall be a person other than the managing or whole-time director.

Further, in case of a One Person Company, Share certificate may be issued under the seal of the Company, if any which shall be affixed in the presence of, and signed by one director or a person authorized by the Board of Directors and the Company Secretary, or any other person authorized by the Board. (Rule 5(3) of Companies (Share Capital and Debentures) Rules, 2014

11. Make necessary entries in the Register of Members, Register of Renewed and Duplicate Share Certificates and Register of Directors and key managerial personnel and their shareholding, if applicable. (Rule 6(3)(a) of Companies (Share Capital and Debentures) Rules, 2014

12. Alter the Capital clause in all the copies of the MOA & AOA available with the Company.

Notes:

1. The particulars of every share certificate issued upon consolidation and division of shares shall be entered forthwith in a Register of Renewed and Duplicate Share Certificates maintained in Form No.SH.2 indicating against the name(s) of the person(s) to whom the certificate is issued, the number and date of issue of the share certificate in lieu of which the new certificate is issued, and the necessary changes indicated in the Register of Members by suitable cross-references in the Remarks column.

2. The register shall be kept at the registered office of the company or at such other place where the Register of Members is kept and it shall be preserved permanently and shall be kept in the custody of the company secretary of the company or any other person authorized by the Board for the purpose.

3. All entries made in the Register of Renewed and Duplicate Share Certificates shall be authenticated by the company secretary or such other person as may be authorised by the Board for the purposes of sealing and signing the share certificate under the provisions of sub-rule (3) of rule 5.

Procedure Authors

ACS Divya Jain
ACS Palak Jain
ACS Ankita Jain
ACS Sugandh Jain
ACS Mansi Kapor
ACS Bhawna Sharma


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