21 November 2012
A Company is showing its Authorised Capital as under:
The Authorised Capital of the Company is Rs. 100 Crores divided into 10 crore shares of Rs. 10/- each with power to increase or decrease ........
It does not classify the Authorised Capital into Equity and Preference. It shows the unissued portion of the authorised capital as unclassified shares of Rs. 10/- each in its Balance Sheet.
Whenever required, at the time of issuance of new shares, the unclassified shares are re-classified by way of a Board Resolution into Equity or Preference.
No change is made in the Capital Clause of the MOA at any stage which continues to show the above given capital clause.
Please confirm whether the above practice is correct? Humble request - substantiate your opinions with supporting provisions of law.
22 November 2012
The above practice is absolute wrong... Capital can be issued within the purview of Clause V of MOA which can only be amended by way of Ordinary Resolution passed by the Shareholders, board has no authority to amend the MOA of the Company.
You need to first pass ordinary resolution and bifurcate the authorised capital into equity and preference.
then in case of private company board may time to time pass board resolution and allot shares.
In case of public company, special resolution under section 81(1A) need to be passed and form 23 is to be filed.
24 November 2012
Principally I hold the same view. But I am not able to substantiate my view with legal provisions and hence I have raised this query to this forum. I request Mr. Ankur, if you can help me with specific provisions under which your and my views can be held good.
CAclubindia
