# Alteration of Share Capital (Section 61)

## Pre-condition

A limited company having a share capital may alter the capital clause of its memorandum of association ONLY IF authorised by its Articles of Association.

## Permitted Modes of Alteration

A company may, by ordinary resolution at a general meeting:

#	Mode	Description
(a)	Increase	Increase authorised capital by such amount as it thinks expedient
(b)	Consolidate & divide	Consolidate and divide whole or part of capital into shares of larger amount
(c)	Convert	Convert fully paid-up shares into stock, or stock back into shares of any denomination
(d)	Sub-divide	Sub-divide capital into shares of smaller amount. Proportion of paid-up to unpaid must remain the same as in the original share.
(e)	Cancel	Cancel shares not taken up and reduce capital accordingly

## Approval Requirements

### General Rule

An ordinary resolution in general meeting is sufficient.

### Special Rule — Tribunal Approval

Approval of the National Company Law Tribunal (NCLT) is required only where consolidation and division [(b)] results in a change in voting percentage of shareholders.
Other modes do NOT require Tribunal approval.

## Notice to Registrar [Section 64 + Rule 15]

Within 30 days of alteration, the company must file:

Form SH-7 with the Registrar,
who will record the change and amend the memorandum accordingly.

## Important Clarification [Sub-section 2]

Cancellation of unsubscribed shares under clause (e) is NOT treated as a reduction of share capital.

Note: Reduction of share capital is dealt with separately under Section 66.

## Quick Distinctions

Concept	Section
Alteration of share capital (housekeeping)	Section 61
Reduction of share capital (substantive)	Section 66
Bonus issue	Section 63
Rights issue	Section 62
Buy-back	Section 68

## Visual Map of Capital Changes

```

Alteration of Share Capital (s.61)

│

┌──────────┬───────────────┼───────────────┬──────────┐

Increase Consolidate Convert Sub-divide Cancel

(Tribunal if (NOT a

voting % changes) reduction)

```

Worked example

### Example 1

Example 1 — Sub-division: ABC Ltd. has 1,00,000 shares of ₹10 each (₹6 paid up). It sub-divides each share into 10 shares of ₹1 each. Each new share must have ₹0.60 paid up and ₹0.40 unpaid — maintaining the same proportion.

### Example 2

Example 2 — Consolidation needing Tribunal: XYZ Ltd. consolidates 10 shares of ₹1 each into 1 share of ₹10. If this changes voting percentages (e.g., fractional rounding), NCLT approval is required. If percentages remain unchanged, an ordinary resolution suffices.

### Example 3

Example 3 — Cancellation of unsubscribed shares: PQR Ltd.'s authorised capital is ₹10 crore. ₹3 crore was never subscribed. The company cancels this ₹3 crore — this is NOT a reduction under Section 66 (it's just an alteration under Section 61). Form SH-7 must be filed within 30 days.

### Example 4

Example 4 — Articles silent: DEF Ltd.'s Articles do NOT authorise alteration of capital. The company must first alter the Articles (Section 14) to grant such authority before invoking Section 61.

⚠️ Common exam mistakes

Forgetting that authority in the Articles is a pre-condition — without it, the company must first amend the Articles.
Assuming Tribunal approval is needed for all alterations — it is only required for consolidation/division that changes voting percentages.
Treating cancellation of unsubscribed shares as reduction of capital — it is NOT; reduction is under Section 66.
Missing the 30-day SH-7 filing requirement with the Registrar.
On sub-division, changing the paid-up proportion — the ratio of paid-up to unpaid must remain the same.
Believing a special resolution is required — an ordinary resolution in general meeting suffices.

Bare-Act text Section 61 · The Companies Act, 2013 · click to expand

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 by any person. 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.

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Power of Limited Company to Alter Share Capital

Worked example

⚠️ Common exam mistakes