Classification of paid up capital

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Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 can a paid up share capital be clasified in to Equity and Preference share capital, when the existing paid up capital consist only of Equity share capital ? What is the procedure? Is section 391 of the Companies act1956 applicable?

CS Ankur Srivastava

CS Ankur Srivastava (Expert)
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24 September 2012 You have to amend you MOA regarding change in capital clause and bifurcate the authorise share capital into equity and preference.

For this you need to pass Ordinary Resolution in duly executed general meeting and file form 5.

Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 Please guide for the example given below:

A Ltd.having existing Authorised Equity captal Rs.50 Lac and Paid up capital Rs.30 Lac.The Company wish to classify the existing capital into Equity and Preference shares.As per Act unissued equity share capital be cancelled and classified and issued as Preference shares.My question is whether the company classify existing paidup capital into equity and Preference shares? Is there any differences for private limited co.

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Ajay Mishra

Ajay Mishra (Expert)
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24 September 2012 Hi

Procedure for Alteration in authorised capital of the company

1. Convene a Board Meeting after issuing notices to the directors of the company to decide about the increase and to fix the date, time, place and agenda for convening a General Meeting.
2. To pass an Ordinary Resolution (Special Resolution if so required by articles) for the same.
3. Download Form -5 from www.mca.gov.in
4. Fill the details required such form except signature of the concerned person.
5. Opt the option to pay stamp duty electronically along with ROC fee on Form-5 with concerned ROC.
6. Please attached altered MOA and AOA with the Form-5 filed with concerned ROC .
7. File MOA along with stamped form-5 with concerned ROC (if required).
8. After approval of Form-5 from ROC make necessary changes in MOA and AOA and in all other papers and documents.

If you are altering Authorised Capital by Special Resolution or also change in Article of Association it is required to file Form 23 with concerned ROC within 30 days from the date of passing such resolution.

Ajay Mishra

Ajay Mishra (Expert)
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24 September 2012 Hi

For example, your MOA capital Clause V will be as follow: " The Authorised Share Capital of the Company is Rs. 30,00,000 divided into 200000 equity shares of Rs. 10 each and 10000 11% Preference Shares of Rs. 100 each."

Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 Ok.
Is it by this procedure that we classify the existing equity paidup capital into Equity and preference share capital? Does Section 391 has no applicability in classification/ reclassification of the paid-up capital?

Ajay Mishra

Ajay Mishra (Expert)
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24 September 2012 If you made your capital arrangement as per section 391 then you follow section 391.

Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 Please guide

A Ltd. :

Existing Equity Authorised capital Rs.50 Lac = 50000 shares of Rs.100 each
Existing Equity Paid-up capital Rs.30 Lac = 30000 shares of Rs.100 each

Can Company reclassify like

Equity Authorised capital Rs.40 Lac = 20000 shares of Rs.100 each
Preference Authorised capital Rs.10 Lac = 100000 shares of Rs.10 each

Equity Paid-up capital Rs.20 Lac = 20000 shares of Rs.100 each
Preference Paid-up capital Rs.10 Lac = 100000 shares of Rs.10 each

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Querist : Anonymous

Querist : Anonymous (Querist)

Ajay Mishra

Ajay Mishra (Expert)
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24 September 2012 Hi

Authorised Share Capital is consist of equity and preference share capital. You can not use the word Equity Authorised Share capital. You only use "Authorised Capital".

Please see my example given above. The similar will be shown in MOA of the Company.

Querist : Anonymous

Querist : Anonymous (Querist)

24 September 2012 Ok , agree that we cannot use the equity authorised share capital.Please guide

A Ltd. :

Existing Authorised capital Rs.50 Lac = 50000 Equity shares of Rs.100 each
Existing Paid-up capital Rs.30 Lac = 30000 Equity shares of Rs.100 each

Can Company reclassify like

Authorised capital Rs.50 Lac = Equity shares Rs.40 Lac, 40000 Equity shares of Rs.100 each and Preference shares Rs.10 Lac = 100000 shares of Rs.10 each

Paid-up capital Rs.30 Lac = Equity shares 20 Lac 20000 shares of Rs.100 each and Preference Paid-up capital Rs.10 Lac = 100000 shares of Rs.10 each

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2012 Sir , waiting for your opinion.

Thanks

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Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

You mention only authorised capital in MOA no need to give details of paid up capital.

Your Authorised capital is ok, only you mention the percentage of return on Preferenc Shares. 12% 13% or 14% you must mention in case of prefernce shares in authorised share capital clause.

Querist : Anonymous

Querist : Anonymous (Querist)

25 September 2012 Ok.as regards to changes in Authorised capital it can be only after alteratation of MOA.But in form 5 we have to mention the paid up capital also.
Suppose,

if Auth cap Rs.50 L = Equity Rs.50 L
and Paid-up Rs.50 L = Equity Rs.50 L

Now the co wants to bifercate the auth cap as well as paid up cap into equity and preference shares without disturbing the total auth cap.Please guide.

Ajay Mishra

Ajay Mishra (Expert)
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25 September 2012 Hi

Please check what was the words of your capital clause, check the paid up clause is mention in your capital clause.

Form 5 is a Form and not you MOA, so don't compare the content from Form-5 with capital clause of MOA.

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