Capital Clause and Alteration of Share Capital (Section 61, 64)
# Capital Clause and its Alteration
## Capital Clause — Essentials
Only companies having a share capital have this clause.
Must state the amount of capital with which the company is registered (the "authorised", "nominal", or "registered" capital).
Capital is divided into shares of fixed value (nominal value / face value).
## Alteration of Capital Clause — Section 61
Unlike other clauses (governed by Sec 13), the capital clause is altered under Section 61.
### Conditions
The company must be a limited company having share capital.
Authority to alter must be in the Articles of Association.
Ordinary Resolution in general meeting suffices.
Notice in Form SH-7 to be filed with ROC within 30 days (Sec 64).
### Five Modes of Alteration [Sec 61(1)]
(a) Increase authorised share capital by such amount as required;
(b) Consolidate existing shares into shares of larger denomination;
(c) Convert fully paid-up shares into stock, or vice versa;
(d) Sub-divide existing shares into shares of smaller denomination;
(e) Cancel shares which have not been taken up or agreed to be taken up — known as diminution of share capital. NOT treated as reduction under Sec 66.
### Special Approval — NCLT
Consolidation or division that results in changes in voting percentage of shareholders requires NCLT approval on application in prescribed manner.
## Section 64 — Penalty for Non-Notice to ROC
If a company fails to file notice of alteration/increase of capital with the ROC (with altered memorandum):
Company: penalty of ₹500 per day of continuing default, OR ₹5,00,000, whichever is less.
Officer in default: penalty of ₹1,00,000.
Worked example
### Example 1
Q: XYZ Ltd has 10,00,000 shares of ₹10 each as authorised capital. It wishes to consolidate them into 1,00,000 shares of ₹100 each. The Articles authorise alteration. What is the procedure?
A: (i) Confirm AOA authorises alteration of capital — Yes. (ii) Pass an Ordinary Resolution in general meeting under Sec 61(1)(b). (iii) File Form SH-7 with ROC within 30 days. (iv) If consolidation does NOT change voting percentages, no NCLT approval needed; if it DOES change voting percentages, file application to NCLT for approval.
### Example 2
Q: A company alters its capital clause but fails to file notice with ROC for 60 days. What penalty applies?
A: Under Sec 64, the company is liable to a penalty of ₹500 per day of default, OR ₹5,00,000, whichever is less. For 60 days: ₹500 × 60 = ₹30,000 (less than ₹5,00,000), so penalty = ₹30,000. The officer in default is additionally liable to a penalty of ₹1,00,000.
⚠️ Common exam mistakes
Confusing Section 13 (alteration of memorandum) with Section 61 — capital clause alteration is exclusively under Sec 61.
Believing alteration requires a Special Resolution — Sec 61 only requires an Ordinary Resolution (provided AOA authorises).
Forgetting that 'cancellation of un-taken-up shares' (diminution) under Sec 61(1)(e) is NOT a reduction of share capital under Sec 66.
Missing the trigger for NCLT approval — only consolidation/division that CHANGES voting percentages needs NCLT approval.
Bare-Act text Sections 61, 64 · Companies Act, 2013 · click to expand
Section 61(1): A limited company having a share capital may, if so authorised by its articles, alter its memorandum in its general meeting to — (a) increase its authorised share capital by such amount as it thinks expedient; (b) consolidate and divide all or any of its share capital into shares of a larger amount than its existing shares: Provided that no consolidation and division which results in changes in the voting percentage of shareholders shall take effect unless it is approved by the Tribunal on an application made in the prescribed manner; (c) convert all or any of its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any denomination; (d) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum; (e) cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.
Section 64: Where a company alters its share capital in any manner specified in sub-section (1) of section 61... the company shall file a notice in the prescribed form with the Registrar within thirty days of such alteration or increase or redemption, as the case may be, along with an altered memorandum.