Authorised capital

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CS Vandana Kacholia (Querist)

14 July 2009 1)Can resolution for increase in authorised share capital be passed as an ordinary resolution?? if yes/No then on what basis??

2) Is it required to pass special resolution for issue of bonus shares and file form 23 for registration of it??

Thanks
Vandana

Ankur Garg

Ankur Garg (Expert)

14 July 2009 Hi Vandana,

ANSWER:1

As you are aware increase in AC involves alteration of MOA for which you have to obtain approval of shareholder u/s 94 and more specifically u/s 94(2).

The reason behind OR of shareholders u/s 94(2) is quite simple and the reason is Section 94(2) is silent about kind of resolution. Hence ordinary resolution would be enough u/s 94 as law is silent about kind of resolution. Where intention of law is to pass SR the same is specifically mentioned In the respective section like in Section 99, 100 and many more….
And where nothing in mentioned you may go ahead with Ordinary Resolution.

ANSWER:2

The Companies Act, 1956 does not contain any provisions dealing with bonus shares. Section 205(3) of the Companies Act, 1956 there is no prohibition on a company to capitalise its profits or reserves for the purpose of issuing fully paid-up bonus shares or paying up any amount, for the time being unpaid, on any shares held by the members of the company.

You need to check whether your Articles of Association contains any restriction on capitalization of profits or reserves for issuing fully paid up bonus shares.

Regulations 96 & 97 of Table A to Schedule I of the Companies Acty, 1956 contain provisions relating to capitalisation of profits and reserves of the company. As per these regulations the proposal to issue bonus shares has to be approved by the shareholders of the company in general meeting upon recommendation by the Board of Directors of the company However if these regulations have been excluded from the Articles of Association of the company then it shall be sufficient if the Board approves the bonus issue.

To conclude if your AOA required obtaining shareholders approval then you need to pass Ordinary Resolution and file form 23 along with form 2 for allotment otherwise it shall be sufficient to pass Board resolution for allotment of bonus shares.

Best Regards