Reg:Capital Incrrease

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Priya Sharma (Querist)

14 September 2010 Respected Experts

Kindly guide me on the following query.

What are the circumstances when capital incrase can be done by way of special resolution & ordinary resolution??

Is it alwayz necessary to increase the capital by way of special resolution??

Please suggest.

Thanks in advance.

Best Regards

Priya Sharma

Ankur Garg

Ankur Garg (Expert)

14 September 2010 Hi,

For increase in authorised capital no need to pass special resolution. This increase is covered u/s 94 which requires an ordinary resolution.

Normally for increase in authorised capital only MOA is required to alter which can be done by passing ordinary resolution u/s 94. However if increase in authorised capital involves alteration in Articles (bcoz amount of AC also mentioned in articles) than you have to pass special resolution for alteration in articles u/s 31 along with ordinary resolution u/s 94. Here 2 separate resolutions are required.

Revert if there is any doubt.

Regards

Priya Sharma

Priya Sharma (Querist)

14 September 2010 What are the other sources ,other than Securities Premium account,which can be utilised for Bonus issue???

Priya Sharma

Priya Sharma (Querist)

14 September 2010 Dear Ankur Sir

Our Articles of Association contains the amount of AC.But we can alter MOA and AOA with a single resolution and get it passed with special resolution.

Kindly correct me if I am wrong.

Regards
Priya

Priya Sharma

Priya Sharma (Querist)

14 September 2010 Can we pass the resolution for capiatl increase through Circular Resolution??

Plaese suggest , its urgent.

Regards
Priya Sharma

Ankur Garg

Ankur Garg (Expert)

14 September 2010 Hello,

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. According to these regulations only the share premium account and the capital redemption reserve account shall be applied in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares.

Sources on bonus issue

As per 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. However the following points have to be borne in mind while determining the profits or reserves which may be capitalized, namely,

1. The securities premium account may be applied by the company in paying up unissued securities of the company to be issued to members of the company as fully paid bonus securities [Section 78(2) of the Companies Act, 1956]

2. The capital redemption reserve account may, be applied by the company, in paying up unissued shares of the company to be issued to members of the company as fully paid bonus shares. [Section 80(5) of the Companies Act, 1956]

Also Note:

If the company has adopted regulation 96 of Table A in Schedule I to the Companies Act, 1956 only the share premium account and capital redemption reserve account shall be applied in the paying up of unissued shares to be issued to members of the company as fully paid bonus shares. It is advisable to consult the auditors of the company in drawing up the terms and conditions of the bonus issue.

Best Regards

Ankur Garg

Ankur Garg (Expert)

14 September 2010 Yes you can pass the capital increase resolution through postal ballot process u/s 192A. But it is a lengthy process as far as time is concerned.

Regards

Ankur Garg

Ankur Garg (Expert)

14 September 2010 As you article contain the amount of AC so you have no other choice but to pass a special resolution to alter your articles u/s 31 along with Ordinary Resolution.

No single resolution is not allowed bcoz 2 different sections are involved i.e. Ordinary resolution u/s 94 and special resolution u/s 31.

Also make a separate agenda for this GM. Alter the capital clause of article once for all.

Revert if there is any doubt.

Regards

Priya Sharma

Priya Sharma (Querist)

09 October 2010 I got your point Sir..

We will pass one ordinary resolution for altering the capital in MOA and one special resolution for altering the capital in AOA.

And then we will file one form 5 and form 23(for the alteration of AOA)along with the necessary documents.

Am I right Sir??

Regards
CS Priya Sharma

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