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CS Executive · Company Law and Practice · Share and Share Capital - Concepts

Kaveri Foods Ltd has 1,00,000 fully paid equity shares of Rs 10 each. Its articles authorise alteration of capital. It proposes to sub-divide its shares into shares of Rs 2 each. Which statement is correct under Section 61(1)(d)?

Sub-division is allowed if the proportion between paid and unpaid amount on each reduced share equals that of the original share. Section 61(1)(d) does not require full payment; it only preserves the paid-to-unpaid proportion when shares are divided into smaller amounts.

  1. ASub-division is allowed only if all shares are fully paid
  2. BSub-division is allowed, provided the proportion between paid and unpaid amount on each new share equals that on the original shareCorrect
  3. CSub-division is allowed only into shares of a larger amount
  4. DSub-division requires the unpaid amount to be called up first

Explanation

Section 61(1)(d) permits sub-division into shares of smaller amount, provided the proportion between the amount paid and the amount unpaid on each reduced share is the same as on the original share. Partly paid shares can therefore be sub-divided. Larger amounts relate to consolidation, not sub-division.

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