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

Mehta Components Ltd has 1,00,000 fully paid equity shares of ₹10 each. It plans to sub-divide each share into 10 shares of ₹1 each. Another class of its shares is ₹100 each, paid up ₹60. Under Section 61, which statement about sub-dividing the ₹100 partly paid shares into ₹10 shares is correct?

On sub-division, the proportion between paid and unpaid amounts on each new share must stay the same as on the original share. A ₹100 share paid ₹60 becomes ₹10 shares each paid ₹6 with ₹4 unpaid. Free allocation of paid-up amount is not permitted.

  1. AEach ₹10 share must be fully paid up at the time of sub-division
  2. BEach ₹10 share must have ₹6 paid and ₹4 unpaid, preserving the original proportionCorrect
  3. CEach ₹10 share must have ₹10 unpaid so that calls can be made later
  4. DThe paid-up amount can be allocated freely among the new shares

Explanation

Section 61(1)(d) requires the proportion between paid and unpaid amounts on each reduced share to equal that of the original share. Original share is 60% paid, so a ₹10 share carries ₹6 paid and ₹4 unpaid. Free allocation or full payment would break this rule.

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