About
Paid-up Share capital is the amount of money a company has received from shareholders in exchange for shares of stock. Moreover, Paid-up share capital is created when a company sells its shares on the primary market directly to investors.
INCREASE THE SHARE CAPITAL
The members of the company anytime may increase or decrease the capital of the company. Paid-up share capital of the company can be increased by issuing shares either to an existing shareholder or to any other person in the case of both public/private limited companies.
But there are some restrictions imposed on the private limited company to issue shares.
Private companies cannot issue shares to the general public whereas public limited can. Shares, in case of private limited, can be issued to a maximum of 200 people.
THE PROCEDURE TO INCREASE THE PAID-UP SHARE CAPITAL:
- After taking decisions regarding Share capital in the board meeting of the company, a board’s resolution is passed stating therein the way to issue new shares whether to existing shareholders or the general public.
- Thereafter Issue a notice to the members of the company as per Section 101 of the Companies Act, 2013 for calling a general meeting and to approve the same by passing the resolution.
- Relevant form submitted to the MCA portal for the same as per requirement.
- Issuance and allotment shares to the shareholders of the company within 60 days of depositing the application amount.
- After allotment of shares issued, the company shall issue share certificates to the shareholders of the company respective of their shares within 2 months of allotment of shares.
It must be noted that Paid-up capital shall not be more than the authorized capital of the company mentioned in the memorandum of the company.
The company cannot issue shares more than its authorized capital. If the company decides to raise beyond its authorized capital then the company needs to alter the memorandum of the company and increase the limit therein.
DECREASE/REDUCTION OF SHARE CAPITAL
Reduction of share capital means decreasing the number of the share capital of the company to reduce the excess capital of the company, for balancing the capital structure for increasing the value of shareholders, and the profit of the company.
There are many ways to reduce the share capital of the company apart from the Redemption of Preference Share Capital and Buy-Back. Reduction of share capital.
Section 66 of the Companies Act, 2013(According to section company can reduce its share capital, provided it should have power under its Article of Association to do so. Bypassing a special resolution to reduce share capital and in particular ways.
- Extinguishing and reducing the liability of member in respect of the capital not paid up;
- Writing off or canceling any paid-up share capital which is lost, or is not represented by the available asset.
- Paying off any paid-up capital which is more than the need of the company.
The reduction of shares of the Company can only be done with the approval of NCLT (National Company Law Tribunal).
THE PROCEDURE TO REDUCE THE SHARE CAPITAL:
- The company cannot reduce its share capital without the permission/approval of National Company Law Tribunal (NCLT)
- The Tribunal shall give notice of every application made to the Central Government, Registrar, and the Securities and Exchange Board, in the case of listed companies, and the creditors of the company and shall take into consideration the representations if any within 3 months from the date on which notice is received.
- After receiving NOC by the Tribunal within a specified period from any above-mentioned persons then the Tribunal will presume that there is no objection to the reduction in the Share Capital.
- The Tribunal may, if it is satisfied that the debt or claim of every creditor of the company has been discharged or determined or has been secured or his consent is obtained, make an order for confirming the reduction of share capital on such terms and conditions as it deems fit.
- The Tribunal will approve the application only if it is satisfied that the proposed company followed the proper accounting treatment with accounting standards and also filed a certificate obtained by the company’s auditor for the same.
- The order of confirmation for the reduction of share capital by the Tribunal shall be published by the company in such a manner as directed by Tribunal.
- The company shall deliver a certified copy of the order of the Tribunal and a minute approved by the Tribunal showing—
- the amount of share capital;
- the number of shares into which it is to be divided;
- the amount of each share; and
- the amount, if any, at the date of registration deemed to be paid-up on each share,
to the Registrar within 30 days of the receipt of the copy of the order, who shall register the same and issue a certificate to that effect.
