Sections 61 and 62 of the Companies Act, 2013: Alteration and Further Issue of Share Capital

Section 61 - Power of a Limited Company to Alter Its Share Capital

Section 61 applies to a limited company having share capital. The company must be authorised by its articles, and the alteration is made by altering the memorandum in general meeting in the manner permitted by the section.

What alterations are permitted?

Subject to Section 61, a company may:

• increase its authorised share capital by an amount it considers expedient;
• consolidate and divide all or any of its share capital into shares of a larger amount;
• convert fully paid-up shares into stock and reconvert that stock into fully paid-up shares of any denomination;
• sub-divide shares into shares of a smaller amount while preserving the proportion between the paid and unpaid amount; and
• cancel shares that have not been taken or agreed to be taken and reduce the stated amount of share capital by the amount of those cancelled shares.

Cancellation of unissued shares under Section 61(1) is expressly not treated as a reduction of share capital under Section 61(2). A reduction of share capital is separately governed by Section 66.

Practical Procedure for Alteration of Share Capital

1. Check whether the articles authorise the proposed alteration. If necessary, amend the articles in accordance with the Act before proceeding.
2. Place the proposal before the Board and approve the steps required for calling the general meeting.
3. Pass the resolution required for the particular alteration in general meeting, subject to any additional statutory requirement applicable to the transaction.
4. Where consolidation changes shareholders' voting percentages, obtain the required Tribunal approval before the alteration takes effect.
5. Comply with Section 64 by filing notice of the alteration of share capital with the Registrar in the prescribed form and within the applicable statutory period.
6. Update the memorandum, statutory records and capital structure after completion of the alteration.

The exact filing form, attachments and fee should be checked on the MCA portal at the time of filing because electronic forms and filing workflows may change.

Section 62 - Further Issue of Share Capital

Section 62 applies when a company having share capital proposes to increase its subscribed capital by issuing further shares. The section provides the principal routes for such an issue: a rights offer to existing equity shareholders, an employee stock option scheme, or an issue to other persons subject to the statutory requirements.

Rights Issue under Section 62(1)(a)

Further shares are ordinarily offered to persons who are holders of equity shares on the date of the offer, broadly in proportion to the paid-up share capital on those shares. This protects existing shareholders by giving them the first opportunity to subscribe to the new equity in proportion to their existing holding.

Offer period

The notice must specify the number of shares offered and the period within which the offer may be accepted. Following the 2020 amendment to Section 62 and Rule 12A of the Companies (Share Capital and Debentures) Rules, 2014, the minimum acceptance period is seven days from the date of the offer, while the Act provides a maximum period of thirty days.

Right of renunciation

Unless the articles provide otherwise, the offer includes a right to renounce the shares offered, or any of them, in favour of another person. The offer notice should state this right.

Disposal of unsubscribed shares

After expiry of the offer period, or after earlier receipt of an intimation declining the offer, the Board may dispose of the unsubscribed shares in a manner that is not disadvantageous to the shareholders and the company.

Dispatch of notice

Section 62(2) requires the rights offer notice to be dispatched to existing shareholders through a permitted mode having proof of delivery at least three days before opening of the issue.

Employee Stock Options under Section 62(1)(b)

A company may offer further shares to employees under an employee stock option scheme. Section 62(1)(b) requires a special resolution and compliance with the prescribed conditions. Companies should also examine the applicable Companies (Share Capital and Debentures) Rules, 2014 and, for listed entities, the applicable SEBI framework.

Issue to Other Persons under Section 62(1)(c)

Further shares may be offered to persons other than those covered by the rights issue or employee stock option routes if the issue is authorised by a special resolution. The consideration may be cash or consideration other than cash.

The issue price must be supported by the valuation required by Section 62(1)(c), and the issue must comply with the applicable provisions of Chapter III of the Companies Act, 2013 and the prescribed conditions. Depending on the structure of the transaction, the provisions governing private placement and the Companies (Prospectus and Allotment of Securities) Rules, 2014 may also require examination.

Conversion of Debentures or Loans into Shares

Section 62(3) excludes from the ordinary operation of Section 62 an increase in subscribed capital caused by exercise of a conversion option attached to debentures or loans, provided the conversion terms were approved by special resolution before issue of the debentures or raising of the loan.

Sections 62(4) to 62(6) contain a separate mechanism for conversion of debentures or loans obtained from the Government where the Government considers conversion necessary in the public interest. If the company does not accept the terms and conditions of conversion, it may appeal to the Tribunal within sixty days from communication of the order. The statute also specifies matters to be considered in fixing conversion terms and the consequential alteration of authorised share capital.

Difference between Section 61 and Section 62

Key Compliance Checklist

• Check the memorandum and articles before altering or issuing share capital.
• Identify whether the transaction is an alteration under Section 61, a further issue under Section 62, or both.
• Use the correct Board and shareholder approvals for the chosen route.
• For a rights issue, observe the current seven-day minimum acceptance period and the thirty-day statutory maximum.
• Preserve proof of dispatch of the rights offer notice.
• For ESOP or preferential issues, verify the applicable rules, valuation and special-resolution requirements.
• For listed companies, additionally verify the applicable SEBI regulations and stock-exchange requirements.
• Complete MCA filings and update statutory registers and corporate records within the applicable time limits.

Official Legal Resources

For the current statutory text, rules, notifications and filing services, refer to the official Ministry of Corporate Affairs and India Code resources. Companies should verify the latest notifications and electronic filing requirements before acting on a transaction.

• Ministry of Corporate Affairs - official portal
• Companies Act, 2013 - official MCA text
• Companies (Share Capital and Debentures) Amendment Rules, 2021 - Rule 12A
• India Code - official legislation portal