Alteration of Share Capital

Presentation on Alteration of Share Capital which is the subtopic of Internal Reconstruction of a company.

1. Advance Corporate Accounting PRESENTED BY  RAGHAV BHOJWANI

2. WE WILL LEARN ABOUT: What are stock and shares? What is Share Capital? What is Internal Reconstruction? Alteration in share capital Procedure to Alter  Share Capital. Types of Alteration in Share Capital Journal Entries Example

3. What are Stocks and Shares? Stocks refers to the slice of ownership of one or more companies. A share is the single smallest denomination of a company's stock. It often refers to the ownership of a particular company.

4. Share Capital Share is the share in the share capital of the company. Share capital is  the total amount of money or property company has received through selling his shares to its shareholders Share Capital are of three types: Authorized share capital, Issued Share capital, Subscribed share capital. The Balance sheet shows the Subscribed Share capital.

5. Internal Reconstruction Internal reconstruction refers to the method of corporate restructuring wherein existing company is not liquidated to form a new one. No new company is formed It is done to get the true and fair view of the company. The assets are revalued, Ficticious assets are removed, alteration in liabilities and alteration in share capital.     

6. Alteration means a Change in the Appearance, character or structure of something. Alteration of Share Capital refers to the changes in the existing capital structure of the firm.  It is one of the way of Internal Reconstruction. Alteration in share capital can be done if its mentioned in the article of association of company. Alteration in Share Capital

7. Procedure to Alter Share Capital Check the authorization to alter share capital       in  Article of association. Issue  a Board notice with the agenda of the meeting at least 7 days before the date of the meeting. Hold a Board Meeting. Pass the Resolution for the Alteration of Share Capital in the Board meeting. The Resolution passed is subject to the approval of Shareholders Meeting.

8. For holding a Shareholders Meeting, fix the date, time and venue for the meeting. Director is authorized to send notice of the Shareholders meeting to the Shareholders. The notice for a Shareholders meeting should be issued at least before 21 days of the meeting Hold a Shareholders meeting Pass the Resolution with the consent of the majority shareholders. After passing of the Resolution, the Registrar of the Companies (RoC) should be notified about the Alteration in Capital within 30 days of the passing of Resolution. If the Registrar is not notified about the Alteration within 30 days, then the company or its officers will be liable to pay a fine up to 10,000 Rupees for each day of delay and which can be extended to 5 lakh Rupees. Procedure to Alter Share Capital

9. Types of Alteration in Share Capital. Following are the ways to alter share capital: Increase in share capital Consolidation of Shares Sub-Division of shares of higher denomination into shares of lower denomination Conversion of shares into stock Cancellation of Shares Alteration in share capital is only possible when it is permitted by the court or else mentioned in the AOA and MOA of the company

10. Journal Entries Issue of New Share Capital Particulars Debit Credit Cash\Bank A/c                  To Capital A/c                      Consolidation of Shares  Assume that Rs. 100000 of share capital divided into 10000 shares of Rs 10 each which is consolidated in 1000 shares of 100 each Particulars Debit Credit Share Capital A/c (10 x 10000)                  To Share Capital A/c (100 x 1000)                     100000 100000

11. Journal Entries Sub-Division of shares of higher denomination into shares of lower denomination Assume that Rs. 100000 of share capital divided into 1000 shares of Rs 100 each which is converted in 10000 shares of 10 each Particulars Debit Credit Share Capital A/c (100 x 1000)                  To Share Capital A/c (10 x 10000)                     100000 100000 Particulars Debit Credit Equity Share Capital A/c                 To Equity Share Stock A/c                     100000 100000 Conversion of Shares into Stock

12. Journal Entries Particulars Debit Credit Equity Share Capital A/c                 To Cash\Bank A/c                     100000 100000 Particulars Debit Credit Equity Share  Stock  A/c                 To Equity Share Capital A/c                     100000 100000 Conversion of stock into shares Cancellation of shares

13. Example: Yes bank has many NPAs.  The Bad loans of Yes Bank are estimated to be around  Rs.40000 crore (Gross NPA) . The overall capital adequacy ratio dropped to  4.2  per cent from 16.3 per cent in the preceding quarter. YES bank’s statutory liquidity ratio has breached the RBI’s minimum requirement and so has its liquidity coverage ratio. The bank has thus provided Rs 86 crore as a penalty to the central bank.

14. As per the government notification, The Whole Board of Directors were Replaced. The Authorized Capital of the Reconstructed Yes Bank shall stand altered to  Rs. 6200 crore  from the Rs.1100 crore earlier. The number of equity shares will stand altered to  3000 crore . The capital of the reconstructed bank at Rs.2 face value per share would be  Rs. 6000 crores. Authorized preference share capital shall continue to be Rs 200 crore. Internal Reconstruction and Alteration in Share capital in YES Bank

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