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Increasing the Share Capital of the Private Company

ArchAngel (Corporate Affairs Enthusiast) (118 Points)

24 May 2011

Dear Experts,

A Private Limited company having a share capital of 2 Lakh, want to increase its capital. As it is a private company, section 81 is not required to be followed, I guess. So the company can issue the shares to some new members, or issue it to the existing members in a different proportion... right?

Does a shareholder has the right to demand that he want that particular % of shares?

Who decides the issued new capital's share pattern? The board? Or a General Meeting which approves the capital expansion?

Thanks and Regards,

ArchAngel

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7 Replies

CMA Sameer Epari (CA Final Student) (409 Points)
Replied 24 May 2011

THE BOARD OF DIRECTORS

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ArchAngel (Corporate Affairs Enthusiast) (118 Points)
Replied 25 May 2011

Thank you Sameer,

Can you also give me some insights on the other questions i've aked like, the right of a shareholder to demand % of shares?

thanks and regards,

ArchAngel.

CMA Sameer Epari (CA Final Student) (409 Points)
Replied 25 May 2011

In my view no shareholder can demand % of share...it is all depends on the board of director's resolution..wait for more replies for confirmation.

ArchAngel (Corporate Affairs Enthusiast) (118 Points)
Replied 25 May 2011

Thank you Sameer :)

- ArchAngel

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 26 May 2011

For increasing the Authorised Share Capital of the Company, shareholders approval in a General Meeting is required. However if the increase is within the authorised share capital then Board Resolution is sufficient.

As regards allotment of new shares, please go through the provisions contained in Articles of Association of the Company. Many private companies put a clause in their AOA that any new shares shall be offered to the existing shareholders first before offering to outsiders. Again if it's a private company, there is a restriction in inviting public to subscribe for the shares. However private placements are permitted.