Board Resolution: Reclassification of Shares

An extraordinary general meeting (EGM) is a meeting other than a company’s Annual General Meeting (AGM). An EGM is also called a special general meeting or emergency general meeting. An EGM is usually called to deal with any of the following situations:

  1. The removal of an executive
  2. A legal matter
  3. Any matter that can’t wait until the next shareholders meeting

An EGM can be carried out on any day including holidays, unlike the AGM. An EGM can be called by the board on the requisition of shareholders, requisitionists, or tribunal.

Hence, in accordance with the Companies Act, 2013, a limited company having a share capital may alter its memorandums in the general meeting with regard to its authorized share capital if it is authorized by its articles.

Share class or share classification are different types of  shares in company stock that have different levels of voting rights The different categories of shares are as follows:

  1. Ordinary Shares
  2. Deferred Ordinary Shares
  3. Non-Voting Ordinary Shares
  4. Redeemable Shares
  5. Preference Shares
  6. Cumulative Preference Shares
  7. Redeemable Preference Shares
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FAQs

What are the reasons for which a Company would classify their shares?

The various reasons for which a Company would classify their shares are given as follows:
– Attract investment
– Push dividend income in a certain direction
– Remove (or enhance) voting powers of certain individuals
– Motivate staff (to remain as employees)

Who can call an Extraordinary General Meeting?

An extraordinary general meeting can be called by a:
– Committee member (if approved by the majority of voting committee members) or,
– A written request signed by at least 25% of lot owners or their representatives or,
– A person authorized by an adjudicator’s order

Do the Directors of the Company have the authority to allot the new shares?

Directors of Private Companies with only one class of share do not need an express authority from the shareholders before they allot new shares.  They can simply allot new shares, subject to the Companies Act and the Articles of Association (AOA).

Board Resolution: Change in Share Capital

“Authorized Capital”, is the maximum amount of share capital that a company can issue to its members/ shareholders. Generally, companies register with a small authorized capital and increase as per the requirements or conditions imposed by the lender/investors, customers. Company has to convene a Board Meeting and pass the resolution for change in share capital and also make necessary changes in MOA/AOA.

Here are the 2 most common reasons for change in Authorised Share Capital

  • To raise the funds to expand the Business.
  • To repay the Debts of the Company.

A company has to convene the board meeting for enabling the board to call for an extraordinary general meeting (if not passed at the Annual General Meeting) to get approval from the shareholders for increasing the authorized share capital.

Pass the resolutions for increasing the authorised share capital of the company.

Draft Board Resolution
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Draft Board Resolution
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Once the Board Resolution for an Increase in authorised share capital is passed, necessary alterations are also to be made in MOA / AOA.

Memorandum of Association and Articles of Association are the 2 public documents which have information about the Company and the Objectives of the Company. They should always be updated as and when any change is made in the Company affairs.

FAQs

How many days prior notice is required to be given for the Board Meeting?

Notice for the Board Meeting shall be given at least 7 days prior to the date of the Board Meeting.

Whether stamp duty is paid on an increase in share capital?

Yes, Stamp Duty is payable on the increase in Authorised capital and is applicable as per the Stamp Act/Rules of concerned State/Union Territory

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Board Meeting: Alter MOA / AOA

Memorandum of Association and Articles of Association are the 2 most important documents of a Company prepared at the time of establishment. These 2 documents have different clauses with all the important & confidential information about the Company. There are various situations under which MOA / AOA needs to be altered. A company has to call EGM and pass a special resolution to alter MOA / AOA in accordance with Section 13 of the Companies Act 2013.

MOA contains the following clauses:

  • Name of the Company
  • Registered Address of the Company
  • Main objects of the Company
  • Authorised Share capital of the Company

Situations under which MOA / AOA needs to be altered:

  • Change in the name of the Company.
  • Change of registered office of the Company.
  • Change in Object Clause of the company.
  • Change in the authorized capital of the company.
  • Change in the liability of the members of the company.

Procedure for Alteration in MOA / AOA

Change in MOA has to be made in accordance with the provisions of Section 13 of the Companies Act, 2013.

  • Hold a board meeting to recommend the proposal for members’ consideration by passing a special resolution.
  • Give notice of an Extraordinary general meeting in which special resolution is to be passed. The notice shall specify the place, date, day and time of the meeting and contain a statement on the business to be transacted at the EGM.
  • Since alteration of the memorandum is a special business, therefore, an explanatory statement u/s 102 of the Companies Act’2013 shall be accompanied with the notice of the meeting in which special resolution is to be passed.
  • The company is required to file special resolution passed by shareholders for the alteration of memorandum of association with the Registrar of Companies. Form MGT-14 has to be filed on MCA portal for registration of special resolution within 30 days of passing of the resolution.
  • Alteration made under section 13 shall not have any effect until it has been registered.
Meeting Minutes
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Meeting Minutes
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FAQs

Is MOA a public document?

Memorandum of Association (MOA) is the supreme public document which contains all those information that are required for the company at the time of incorporation.

What is the difference between MOA and AOA?

Memorandum of Association‘ abbreviated as MOA, is the root document of the company, which contains all the basic details about the company. On the other hand, ‘Articles of Association‘ shortly known as AOA, is a document containing all the rules and regulations designed by the company.

3. Can we change the Main Objects of the Company without changing the name of the Company?

Yes, Main Objects of the Company can be changed without changing the name of the Company after complying with the provisions of Section 13 of the Companies Act, 2013.

Board Meeting: Increase in Share Capital

“Authorized Capital”, is the maximum amount of share capital that a company can issue to its members/ shareholders. Here are the 2 most common reasons for Increase in Authorised Share Capital

  • To raise the funds to expand the Business.
  • To repay the Debts of the Company.

Generally, companies register with a small authorized capital and increase as per the requirements or conditions imposed by the lender/investors, customers.

Draft Meeting Minutes
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Draft Meeting Minutes
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Procedure for Increasing Authorised Share Capital

  • Convene the board meeting for enabling the board to call for an extraordinary general meeting (if not passed at the Annual General Meeting) to get approval from the shareholders for increasing the authorised share capital.
  • Call for an extraordinary general meeting of the shareholders of the company by sending a notice with clear agenda, explanatory statements and the resolutions to be passed to alter the Memorandum of Association and Articles of Association which are to be altered for the purpose of increasing the authorised share capital.
  • Pass the resolutions for increasing the authorised share capital of the company and corresponding alterations in Memorandum of association and Articles of Association by special resolution.
  • Authorise the board to file necessary forms and resolutions with ROC having jurisdiction.
  • File the Form SH-7 with Roc by paying the requisite fee.

FAQs

What is the minimum Authorised Share Capital for a Company?

The Companies Act, 2013 earlier mandated that all Private Limited Companies have a minimum paid up capital of Rs.1 lakh.This meant that Rs.1 lakh worth of money had to be invested in the company by purchase of the company shares by the shareholders to start business.

Whether stamp duty is paid on increase in share capital?

Yes, Stamp Duty is payable on the increase in Authorised capital and is applicable as per the Stamp Act/Rules of concerned State/Union Territory.

What is the difference between authorized capital and paid up capital?

– Authorised capital: Authorised capital is the maximum capital that the company is allowed to raise through the sale of its shares.
– Paid-up capital: It is the part of called up capital which has been actually paid by shareholders and received by the company. It can never be more than Authorised capital.

Form SH-4 : Share Transfer

The Form SH-4 indicates that the transferor wants to transfer the given securities to the transferee. Transfer of shares is the voluntary handing over of the rights and possibly, the duties of a member (as represented in a share of the company). These rights and duties are handed over from a shareholder who wishes to not be a member of the company any more to a person who wishes of becoming a member. Thus, shares in a company are transferable like any other movable property in the absence of any expressed restrictions under the articles of the company.

Additionally, it indicates that both the parties involved willingly accept the conditions of the transfer. There are various different individuals involved in the transfer. They are as follows:

  1. Subscribers to the memorandum
  2. Legal Representatives, in case of deceased
  3. Transferor
  4. Transferee
  5. Company (Listed/Unlisted)

Sample – Draft Form SH-4

The first step in the procedure for Share Transfer is to obtain the Transfer deed in the prescribed Form SH-4. Revenue Stamps amounting to 0.25% of the consideration of the transfer are to be affixed on the Form SH-4. The instrument of transfer may not be in the prescribed form (Form SH-4) in the following cases:-

  • Where a director or nominee transfers shares on behalf of another body corporate under section 187 of the Companies Act, 2013;
  • Where a director or nominee transfers shares on behalf of a corporation owned or controlled by the central or state Government;
  • For transferring debentures, a standard format can be used as the instrument of transfer.
Draft Form SH-4
Draft Form SH-4
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Draft Form SH-4
Draft Form SH-4
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FAQs

What is the ledger folio number in the share certificate?

The ledger folio number is allotted to each shareholder of the company, whereas the share certificate is issued after each allotment. For Example – If further shares are allotted to existing shareholders, the ledger folio will remain the same but the share certificate numbers will not be the same.

What is the stamp duty on share transfer?

The stamp duty applicable on share transfer is at 0.25% on the market value on the date of execution of the transfer deed or consideration value whichever is higher. One can contact the nearest “General Post Office” for Share Transfer Stamps or getting Transfer deeds stamped.

How do I change the name on a share certificate?

Prepare a letter addressing the Company or the RTA of the Company mentioning the reason for your name change and clear details of your new name. Furthermore, enclose the attested copy proofs of name change i.e Affidavit, PAN card, etc. Also, enclose the original share certificate along with the letter.

Meeting Minutes: Share Transfer

Transfer of shares means the voluntary handing over of the rights and possibly, the duties of a member (as represented in a share of the company) from a shareholder who wishes to not be a member in the company any more to a person who wishes of becoming a member. Thus, shares in a company are transferable like any other movable property in the absence of any expressed restrictions under the articles of the company.

A company is required to hold a Board Meeting for the transfer of Shares. Meeting has to record such minutes for the transfer of shares and also pass the necessary resolution for the same and keep it on record.

Persons involved in the transfer

  • Transferor
  • Transferee
  • Company
  • Legal Representative, in case of a deceased.
Meeting Minutes: Share Transfer
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Meeting Minutes: Share Transfer
From here you can download Meeting Minutes for Share Transfer
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Sample Meeting Minutes : Share Transfer

Share transfer can between any 2 persons. Share transfer details must be recorded in the Board Meeting Minutes and it is also mandatory to pass the necessary resolution in the meeting and the keep it on record.

Sample: Meeting Minutes – Share Transfer

FAQs

What is the ledger folio number in the share certificate?

The ledger folio number is allotted to each shareholder of the company, whereas the share certificate is issued after each allotment. For Example – If further shares are allotted to existing shareholders, the ledger folio will remain the same but the share certificate numbers will not be the same.

What is the stamp duty on share transfer?

The stamp duty applicable on share transfer is at 0.25% on the market value on the date of execution of the transfer deed or consideration value whichever is higher. One can contact the nearest “General Post Office” for Share Transfer Stamps or getting Transfer deeds stamped.

How do I change the name on a share certificate?

Prepare a letter addressing the Company or the RTA of the Company mentioning the reason for your name change and clear details of your new name. Furthermore, enclose the attested copy proofs of name change i.e Affidavit, PAN card, etc. Also, enclose the original share certificate along with the letter.

Meeting Minutes: Share Split Procedure

A company issues share certificates to every shareholder of the Company. The split of Share Certificate means dividing one share certificate into various share certificates. Once Share split is done and new share certificates are issued, an old share certificate shall stand cancelled.

Sample Meeting Minutes : Share split

A company has to call for Board Meeting for Share Split procedure to be done. The Chairman informs the Board about the Split of Share of the specific shareholder. Details of share certificate which has to be split is discussed in the Board Meeting and a resolution has to be passed regarding the same and also taken on record.

Meeting Minutes: Share Split
Meeting Minutes-Share Split
Meeting Minutes-Share Split
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Meeting Minutes-Share Split
Meeting Minutes-Share Split
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FAQs

What is the split of share certificate?

The certificates include information such as the number of shares owned, the date when purchased and an identification number. When a stock splits, the company divides its existing shares into multiple shares in an attempt to boost the liquidity of the shares.

At what price do stocks split?

The company’s market capitalization, equal to shares outstanding multiplied by the price per share, isn’t affected by a stock split. If the number of shares increases, the share price will decrease by a proportional amount.

Board Resolution: Opening Branch Office

A company is required to hold a Board Meeting and pass a necessary resolution for opening a new Branch Office and keep the resolution on record. It is a mandatory requirement of the Companies Act to pass the necessary resolution.

Sample : Board Resolution – Opening a Branch Office

Board Resolution – Opening New Branch
Board Resolution:Opening Branch Office
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Board Resolution:Opening Branch Office
From here you can download Board Resolution for opening Branch Office
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FAQs

How can I open a branch office of a foreign company in India?

A foreign company can freely operate in India by registering a branch by obtaining approval of the reserve bank of India through AD category 1 Banker and further registration of the foreign company with the ROC. Such a branch office is treated as a foreign entity and is subject to higher Income Tax @ 40%.

What does the branch office mean?

A branch office is a location, other than the main office, where a business is conducted. Most branch offices consist of smaller divisions of different aspects of the company such as human resources, marketing, and accounting.

Is a branch a separate legal entity?

A branch office is an outlet of a company or, more generally, an organization that – unlike a subsidiary – does not constitute a separate legal entity, while being physically separated from the organization’s main office.

Board Meeting Minutes: Opening a Branch Office

A company needs to call for a Board Meeting and discuss the details of opening a new Branch Office and future aspects that are taken into consideration while opening a new Branch Office. A company has to pass a resolution in the Board Meeting after discussion with the board members for opening a new Branch Office.

Sample Board Meeting Minutes : Opening Branch Office

Meeting Minutes: Opening a Branch Office
Meeting Minutes- Opening a Branch Office
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Meeting Minutes- Opening a Branch Office
From here you can download Meeting Minutes for Opening a Branch Office
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FAQs

How can I open a branch office of a foreign company in India?

A foreign company can freely operate in India by registering a branch by obtaining approval of the reserve bank of India through AD category 1 Banker and further registration of the foreign company with the ROC. Such a branch office is treated as a foreign entity and is subject to higher Income Tax @ 40%.

What does the branch office mean?

A branch office is a location, other than the main office, where a business is conducted. Most branch offices consist of smaller divisions of different aspects of the company such as human resources, marketing, and accounting.

Is a branch a separate legal entity?

A branch office is an outlet of a company or, more generally, an organization that – unlike a subsidiary – does not constitute a separate legal entity, while being physically separated from the organization’s main office.

Meeting Minutes: Disclosure of Interest by Directors

Directors of the Company have to present Disclosure of his / her Interest in the first Board Meeting of every Financial year in Form MBP-1 and DIR-8. Moreover, It is mandatory for all the directors to submit every year.

The Board in its first Board Meeting of the Financial year has to take the note of the disclosure of interest submitted by the Director and also pass the necessary resolution taking the note on record in a specific format.

Sample: Resolution for Disclosure of Interest by Director in Board Meeting

Resolution for Notice of Disclosure of Interest
Resolution for Notice of Disclosure of Interest
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Resolution for Notice of Disclosure of Interest
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FAQs

What is disclosure of interest by director?

Every director of a company who is in any way, whether directly, or indirectly, concerned or interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into, by or on behalf of the company, shall disclose the nature of his concern or interest at a meeting of the Board of directors.

When MBP 1 is required to be filed?

Form MBP-1 needs to be placed in the first Board meeting of the Financial Year. Further, the resolution taking note of such declaration (in form MBP-1) needs to be filed with the ROC within 30 days of the board meeting.

What is Section 184 of Companies Act 2013?

Section 184 of the Companies Act, 2013 (the Act) relates to “Disclosure of interest by directors”. The object of Section 184 of the Act is to bring to the notice of the directors the conflict of interest and duty of any of their colleagues on the Board.