# Alteration of Share Capital (Section 61)

## 1. Conditions for Alteration

A limited company having share capital may alter its capital clause if:

Alteration is authorised by Articles of Association (AOA).
Approved by an Ordinary Resolution (OR) in General Meeting.

## 2. Types of Alteration Permitted

### (a) Increase Authorised Share Capital

The company may increase authorised share capital by any amount it deems necessary.

### (b) Consolidation and Division

Consolidate and divide all or any of its share capital into shares of larger amount.

Special Note: If consolidation and division results in changes in voting powers, it shall be approved by the Tribunal (NCLT).

### (c) Conversion of Shares into Stock

Convert fully paid-up shares into stock and reconvert stock into fully paid-up shares of any denomination.

### (d) Sub-Division (Stock Split)

Sub-divide shares into shares of smaller amount.

Special Note: The paid and unpaid amounts on a reduced share shall maintain the same proportion as the original share.

### (e) Cancellation of Shares (Diminution)

Cancel shares that have not been taken or agreed upon by any person, thereby diminishing the share capital.

Note: This is NOT considered a reduction in share capital (different from Section 66).

## 3. Filing with ROC

Notice must be given to the ROC within 30 days of alteration.
Altered MOA must be filed along with the notice.

## Quick Summary Table

Type	Effect	Special Approval
Increase capital	Higher authorised capital	OR only
Consolidation	Larger denomination	Tribunal (if voting power changes)
Sub-division	Smaller denomination	Maintain proportion of paid/unpaid
Conversion (shares ↔ stock)	Form change	OR only
Cancellation (diminution)	Cancel unissued shares	Not reduction of capital

Worked example

### Example 1

Example 1: XYZ Ltd has authorised capital of ₹10 lakh divided into 1 lakh shares of ₹10 each. It wants to sub-divide each share into ₹2 shares.

Solution: After sub-division: 5 lakh shares of ₹2 each. The total authorised capital remains ₹10 lakh. If a share of ₹10 was ₹6 paid-up and ₹4 unpaid, after sub-division each ₹2 share will be ₹1.20 paid and ₹0.80 unpaid (maintaining the 6:4 ratio).

### Example 2

Example 2: ABC Ltd wants to cancel 10,000 shares of ₹10 each which were never issued. Does this require Tribunal approval under Section 66?

Solution: No. Cancellation of unissued shares (diminution) under Section 61 is NOT considered reduction of capital. Only OR and AOA authority are needed. Section 66 does not apply.

⚠️ Common exam mistakes

Confusing diminution (cancellation of unissued shares) under Section 61 with reduction of capital under Section 66.
Forgetting that Tribunal approval is needed for consolidation only when voting powers change.
Believing Special Resolution is required - Ordinary Resolution suffices under Section 61.
Not maintaining proportion of paid/unpaid amounts during sub-division.
Missing the 30-day ROC filing requirement.

Bare-Act text Section 61 · 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; (b) consolidate and divide all or any of its share capital into shares of a larger amount; (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 into shares of smaller amount; (e) cancel shares which have not been taken or agreed to be taken.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →