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authorised capital

CA Sumat Singhal (Credit Analyst/ Financial Services/ Accounts & Finance) (3677 Points)

04 April 2011

If a Subsidiary Company increases its Authorised and Paidup Share Capital without Knowledge of Holding Company just to dilute the sharholding percentage. Kindly inform what are the precautions in legal terms to be taken by a Holding Company to Control the increase or decrease the Paid up as well as Authorise Share Capital in its Subsidiary Companies.

thanks

regards CS Sumat singhal

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2 Replies

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 04 April 2011

Increase in authorised capital requires shareholders approval. You being the majority shareholder (holding more than 51% of shares), without your consent auhtorised capital cannot be increased.

However increase in paid up capital within the ASC is very much possible. Check your articles, if it contains any restrictions on allotment of new shares. Many private companies incorporate some clauses restricting allotment or transfer of shares to third parties without making offers to the existing shareholders. If you have any such articles in your AOA, then they have to offer new shares to you.

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Sudhir Garg (Service) (236 Points)
Replied 05 April 2011

Agree with Jayashree

Furter, please check the applicability of right issue if Pb company.

Further to check the increase of PUC in future, please amend the AOA incorporting it as "RESERVE MATTER". Further being the holding company, you must have the majority of directors on the board.

Regards- Sudhir