The amount of share capital or equity financing a company has can change over time. A company that wishes to raise more equity can obtain authorization to issue and sell additional shares, thereby increasing its share capital.
As per section 617 of the Companies Act 2006, a limited company is permitted to alter its share capital in the following ways:
- allotting (issuing) new shares.
- reduction of share capital.
- sub-dividing or consolidating share capital.
- re-denomination of shares.
- reconversion of stocks into shares.
You may need a special resolution to change your company’s share structure. This includes if you: change the number of shares the company has and their total value – this is your ‘share capital’ (the part of your company’s money that comes from shares) change how your shares are distributed.
You can appoint (add) new company shareholders at any point after incorporation. To do so, existing shares must be transferred or sold by a current member to the new person. Alternatively, you can increase your company’s share capital by allotting (issuing) new shares.
How to notify Companies House about share transfers. There is no need to notify Companies House about share transfers until you file your next Confirmation Statement. Changes to shareholders should be updated at the same time.
4. All new companies must authorize a minimum amount of capital, which is Rs 1 lakh for Pvt Ltd Companies and Rs 5 lakh for Public Limited Companies.
Form SH-7 needs to filed within 30 days of passing the ordinary resolution with the concerned Registrar of Companies. The concerned RoC will verify the form and the attached documents, after which it will send the approval to increase the authorized share capital of the company.
How to remove a shareholder from a Limited Company
- Shares ownership Transfer. Limited company shares can be gifted or sold to other individuals by using a stock transfer form ( free open source template download). …
- Shareholder’s death. …
- Forcing a shareholder to leave. …
- Updating member’s register. …
- Informing Companies House.
The company can reduce capital by employing one of the following methods:
- Reduce the liability of its shares in respect of the share capital not paid-up.
- Cancel any paid up share capital which is lost or is unrepresented by available assets.
- Pay off any paid up share capital which is in excess.
Many experts suggest starting with 10,000, but companies can authorize as little as one share. While 10,000 may seem conservative, owners can file for more authorized stocks at a later time.
When companies issue additional shares, it increases the number of common stock being traded in the stock market. For existing investors, too many shares being issued can lead to share dilution. Share dilution occurs because the additional shares reduce the value of the existing shares for investors.
Private limited companies are prohibited from making any invitation to the public to subscribe to shares of the company. Shares of a private limited company can also not be issued to more than 200 shareholders, as per the Companies Act, 2013.
Complete a stock transfer form
- Name of the company in which shares are held.
- The amount of ‘consideration money’ that is being paid for the shares – if you transfer shares for free, this should be “Nil”
- Description of security – this specifies the type of shares being transferred (e.g. if there is more than one class)
Dividing equity within a startup company can be broken down into five simple steps:
- Divide equity within the organization.
- Divide equity among company founders.
- Allocate money to investors.
- Divide the option pool into three groups: board of directors, advisors, and employees.
- Create a vesting schedule.
All companies in India have to file their financials and details of shareholders with the Ministry of Corporate Affairs (MCA21). You can access these documents through the website Ministry Of Corporate Affairs.