A company can make any of these a by simple passing a I ordinary resolution, provided it is authorized by its articles to do so. f the articles do not provide for it, then firstly articles niust be changed by passing a special resolution Within thirty days of the date of passing the resolution notice must be g*en to the Registrar together with a copy of resohtion amd altered memoramdum, who will then register the altered memorandum. It is from the date of passing the ordinary resolution that the change becomes effective.
that there is no necessity of passing a resolution fcr alteration of authorised capital where it stands increased by reason of:
(a) an order rnade.by the Cen1ra'2 Govelnment for conversion of 22 . loans or debentures into shares of the cat npany; or
(b) an order made by the Central government on the application of any "public financial inshnution" whisk proposes to convert any debentures or loans with conversion clauses into shares of the company [Sec. 94A (1} and (2)]
It may bv pointed out that this Sesfion does not absolve the company from giN ing notice of the increase of capital to he Registrar of Compames. Such a notice has to be given in the form cf a renlrr. in the presc.ibed form within tlurt- days frc.n the Mite of reel ipt of Go order arid the P.- Or shell th-r. m2f e n-sess rib a. erstlors in the raG-morandurn of the compam [Sec. SEA (3)
(ii) Reduction of share capital. '. Oh a view to ensuring .1 at the company s assets (cushion of safety to the cree Tory are not freed d stributed to the shareholders, the reduction of share capita' is closely guarded under the Companies Act. It is pernfitted for legitirr.ate purposes onlv Fcr in- once a company may be allowed the reduction of share capital (1) to write Ghf Icst : capital--capital unrepresented by any tangible asset owing to heaNs trading losses or (2) to pay ohf surplus capital capital which cannot be employed profitably Somellmes a COrDpany may find itself overcapitalised, that is its rate of earnings be less than the average rate of return in similar oilier compames. In suclt a case it May genuinely decide for of share capital as a corrective step for improving its rate of earnings vis-a-vis other companies in the same industry by accepting pro-rata surrender of shares by members.
the purpose of reduction of share capital is legitimate a company limited by shares or a company limited by guarantee and having share capital may reduce its issued share capital; and may, if net e. alter the capital clause of its .nrmoran;iuni, by adopting the procedure laid down in Sections h)0 to 103 of the Companies Act
It is worth noting here tlu t reduc ion of share capital does not always UIN oh-e alteration of the memorandum. For example, if lost capital is written offnot by reducing the original facevalue of shares but by cancellg a portion of issued share capital is not stated in its capital clause. On the other hand, if lost capital is written offbeat reducing the facevalue of skates, it will cause an alteration in the capital clause of the memoranduun wherein t lo denon ion of shares is stated. Simiktrly, if issued share capital is the reduced by converting the partly paid-up shares into fully paid-lip, possibly because the company does not feel the necessity of raising additional funds in future. it will involve reduction in die face value of shares and will tows necessitate alteration of the memorandum.
Prncer iurr The following procedure is to be followed for effecting a reduction of share capital (Secnons 100-103)
First authont N of the articles to reduce capital must be secured if they do not ) provide for it.
Secondly, a special resolution effecting the reduction of AFT passed and a copy thereof should be filed with the Registrar days of passing the resolution.