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Capital Increase

Priya Sharma (Company Secretary & Student.MBA) (998 Points)

14 September 2010

Hii friends

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

Please suggest.

Thanks in advance.

Best Regards

Priya Sharma

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6 Replies

Ajay Mishra (Company Secretary) (74337 Points)
Replied 14 September 2010

Dear Friend

Nature of passing of resolution for increase in capital depend on the provisions in share capital clause of the Article of Association of the company.

If this clause give blanket approval to increase capital by passing Ordinary resolution, you follow this. But in case your article restrict the Authorized Capital and you want to increase Authorized Capital which will be more than the capital mentioned in article, then, in this situation, first of all you pass Special Resolution for Alteration in capital clause of AOA as per section 31 of the Companies Act,1956. Subsequently you alted Clause V of MOA by OR accordingly.

Regards

CS Ajay Mishra

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 14 September 2010

Hi,

Trust you have checked my reply in the expert section.

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 be altered 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.

As per the info provided ---your article contained 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 u/s 94.

No single resolution is not advisable bcoz here two different sections are involved i.e. Ordinary resolution u/s 94 and special resolution u/s 31. File form 5 and 23 accordingly.

Revert if there is any doubt.

Regards

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 14 September 2010

Let me give you one more suggestion.

Also make a separate agenda for this GM. Alter the capital clause of your article once for all. Use the sample clause for your articles:

“The Authorised Share Capital of the Company is as mentioned in clause V of the Memorandum of Association of the Company with power of the Board of Directors to sub -divide, consolidate and increase and with power from time to time, issue any shares of the original capital with and subject to any preferential, qualified or special rights, privileges or conditions as may be, thought fit, and upon the sub-division of the shares apportion the right to participate in profit in any manner as between the shares resulting from sub-division.”

After inserting this clause in your articles --- only ordinary resolution would be sufficient to increase in authorised capital.

Revert if there is any doubt.

Regards