Change in Paid - up Share Capital

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Paid-up share capital is the part of the total called-up amount which is actually paid by the shareholder. It refers to the amount that has been received by the company through the issue of shares to the shareholders. Paid up capital of the company cannot be more than the authorized capital of the company.

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Which companies can increase its paid-up capital?

Both public limited companies and private limited companies are allowed to increase paid-up capital. However, there are restrictions on private limited companies that they can not issue shares to the general public.

Manner of increasing the Paid up Capital of the Company:
Following are the methods through which a company can increase its paid-up share capital:
1. Private placement
2. Right issue
3. Issue of shares on a preferential basis
4. Sweat equity shares
5. Conversions of loans or debentures into shares
6. Issue of bonus shares

Procedure to increase Paid up share capital of the company
1. Hold a Board Meeting and Pass board resolution at a board meeting
2. It is required to provide notice as per Section 101 of the Companies Act, 2013 to the members of the company to hold the General Meeting and pass a resolution to increase the Paid-up Share Capital.
3. Submit the relevant form to MCA as well as the relevant resolution passed for increasing Paid-up Share Capital. Within 60 days from application, money allots shares to the shareholders.
4. After allotment of shares, the company shall issue share certificates within 2 months from the date of allotment to all the shareholders of the company.

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    Know more about it...

    Authorized Capital – This is the maximum value of securities that the company can legally issue to its shareholders in the form of shares. The authorized share capital is always greater than the paid-up share capital and can be increased at any time with prior approval from the shareholders by passing a resolution.
    Paid-up Capital – This is the sum of money that is actually paid or invested by the shareholders of the company. Under the Companies Amendment Act, 2015, the requirement of having a minimum paid-up share capital has been removed at the time of incorporation of a company.

    No, Paid-up Share Capital can be equal or less than the authorized share capital but cannot be more than authorized share capital.

    Following are the methods through which a company can increase its paid-up share capital:
    Private placement
    Right issue
    Preferential basis
    Sweat equity shares
    Conversions of loans or debentures into shares
    Issue of bonus shares

    The private placement is a method through which the offering of securities can be made to not more than 200 persons in the aggregate in a financial year Excluding qualified institutional buyers and employees of the company.

    It refers to an invitation to subscribe shares to the existing shareholders at discounted rates. In this method when a company wants to raise paid-up capital, it approaches the existing shareholders of the company rather than the public.

    In this method companies issue shares or other securities to a selected group of persons. Value of offer per person shall not be less than Rs. 20000/- of face value. It must be authorized by the Article of association of the company and approved by shareholders at the Annual general meeting.

    These shares are issued to directors or employees at a discount or consideration other than cash for providing known how or making available rights in the nature of intellectual rights or value additions.

    It is an offer to issue additional shares to the existing shareholders. It must be authorized by the articles of association of the company. A Company can simply issue bonus shares with its free reserves. For example, a company will issue 1 share on every 5 shares held by each shareholder of the company.