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Consolidation and sub-division of share capital (Corporate Law)

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This query is : Resolved


( Author )
03 December 2011

Hi all

can someone make me understand the meaning of consolidation and sub-division with proper example and showing calculation how you arrive at a particular figure, please.
Also the benefits and losses of both.


CS Ankur Srivastava

( Expert )
07 December 2011

consolidation of share means when two type of share capital is consolidated into one such as the company has 1000 equity shares of Rs. 10 each and 1000 preference shares of Rs. 10 each he company consolidate it and make the share capital of 2000 equity shares of Rs. 10 each.

sub division of shares means the company have 1000 shares of rs. 10 each and the company sub divide it into 2000 shares of Rs. 5 each.

Under subdivision the floating number of shares increases in the market, liquidity increases.


Neha Jain

( Expert )
07 December 2011

Mr. Ankur,

What if 10000 shares of Rs. 10/- each is converted into 1000 shares of Rs. 100/- each? What it will be known as, whether it is consolidation or subdivison and what is the procedure of the same.

Another query is, in the case of consolidation can preference share capital (which is issued) be converted into Equity shares or only unissued portion of preference capital be converted into equity capital.





CS Ankur Srivastava

( Expert )
12 December 2011

Yes, it will be the consolidation of shares.

For this you need to pass Ordinary Resolution and file form 5.


CS Ankur Srivastava

( Expert )
12 December 2011

In case of consolidation, preference shares cannot be converted into equity shares.

However, if the preference shares were issued as convertible preference shares then only they can be converted as per their terms.


Neha Jain

( Expert )
12 December 2011

Pls answer this :

In the case of consolidation can preference shares (which is issued) be converted into Equity shares (i.e. preference shareholders will become equity shareholders) or only unissued portion of preference capital be converted into equity capital.


What is the procedure for the same.


Neha Jain

( Expert )
12 December 2011

But you mentioned in your reply above to Mr. Parashar dated 07.12.2011 that two types of share capital equity and preference is consolidated into 2000 equity shares of Rs. 10/- each.

Thanks.


Parashar

( Author )
12 December 2011

A share consolidation is the opposite of a share split.

Each shareholder's shares are replaced with a smaller number of shares with a higher par value. If a shareholder has a 1,000 shares with a par value of 10p, then after a 1 for 2 consolidation the shareholder will have 500 shares with a par value of 20p.

it means consolidation is just opposite of sub-division.


Parashar

( Author )
12 December 2011

Sub-division means making the no. of shares more and reducing the par value.


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