Changes in share capital

Changes in share capital

A change in share capital can occur in the following:

1: Alteration of Capital
a. Increase its authorized share capital
b. Consolidation its share capital into shares of larger
amount
c. Sub divide its share capital into shares of smaller
amount
d. Cancel shares which have not been taken by any
person and diminish the share capital by the amount
of the amount of the share cancelled
 Changes in share capital

2: Reduction of share capital

A company may reduce its share capital in the following
ways: (Sec.89)
I. Cancel any paid up share capital which is lost or un
represented by available assets
II. Pay off any paid up share capital which is in excess
of the needs of the company
 Changes in share capital

Procedure for reducing the share capital of company

Special Resolution
A company limited by share, if authorized by its articles, shall
pass a special resolution its share capital. It shall apply to the
court for an order confirming the reduction.
Objection by creditor
Where the proposed reduction involves the payment to
any shareholder of any paid up capital every creditor
of company shall be entitled to object to the
reduction.
 Changes in share capital

Consent of Creditor
Where a creditor does not consent to the reduction,
the court may ignore the consent of that creditor if
the company secures payment of his debt or claim.
Reasons for reduction
The court may require the company to publish the
reasons for reduction or other information with the
view to giving proper information to public.