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

Sundaram Foods Ltd has 1,00,000 shares of Rs 100 each, Rs 60 paid up on each. Its articles permit alteration of capital. It passes a resolution to sub-divide each share into 10 shares of Rs 10 each. Under section 61, which must hold true after sub-division?

After sub-division the paid to unpaid proportion on each new share must match the original share. Here the original Rs 100 share has Rs 60 paid and Rs 40 unpaid, so each new Rs 10 share has Rs 6 paid and Rs 4 unpaid.

  1. AEach new Rs 10 share must be fully paid up
  2. BThe proportion between paid and unpaid amount on each new share must equal that of the original share, i.e. Rs 6 paid and Rs 4 unpaidCorrect
  3. CEach new share must have Rs 10 paid up regardless of the original position
  4. DSub-division requires Tribunal confirmation in every case

Explanation

Section 61(1)(d) requires that on sub-division the proportion between amount paid and unpaid on each reduced share is the same as on the original share. Original ratio is 60:40, so each Rs 10 share carries Rs 6 paid and Rs 4 unpaid. Treating them as fully paid would change liability.

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