Sub-division of Shares for Private Limited Companies

The enhancement and potential adaptability within the private limited companies mainly include strategic adjustments to their share frameworks. One of the significant moves is the sub-division of shares, a procedure that divides existing shares into smaller units without amending the whole ownership structure. In the current article, we explore the comprehensive instructions for private limited companies contemplating the strategic move. From showing the regulatory needs to fostering clear communication with shareholders, these instructions give a roadmap for implementing share sub-division with precision and confidence.

Overview of Sub-division of shares for private limited companies

The sub-division of sharesmeaningis a strategic procedure employed by private limited companies to raise the shares to maintain a similar proportion of ownership among shareholders. It includes the division of existing shares into small ones, thereby decreasing the nominal or face value of each share. Meanwhile, the whole value of the company’s share capital remains the same, sub-division leads to liquidity, facilitates trading, and can create shares more accessible to investors.

Necessary documents for sub-division of shares for private limited companies

Here is a list of necessary documents for the sub-division of shares for private limited companies:

• Provide a certified copy of shareholder’s resolution by approving the sub-division of shares.
• Provide a certified copy of the board resolution for approval of the sub-division of shares.
• If a company is unlisted, a copy of the notice/ letter is sent to shareholders informing them of the record date.
• For shares need a corporate action information form, which is duly filled in with details post sub-division.
• Need to activate new ISIN, for that CFI information needs to be furnished according to the format.

These above-mentioned documents shall be submitted before 10 days of the record date.

Process for sub-division of shares for Private Limited Companies

The procedure forsub-division of sharesCompanies Act, 2013for private limited companies is as follows:

• Go through the Articles of Association for authority to amend the share capital
• To attain the investor’s consent before sub-division
• Need to get approval from the board resolution for the sub-division of share capital and to provide required authorities about and taken as alteration of Memorandum of Association.
• Require to pass ordinary resolution for sub-division of share
• Need to pass an ordinary resolution foralteration of the memorandum of association.
• Fill the e-form SH-7, which is a notice to RoC for change in share capital within 30 days of permission from members along with ordinary resolution and amendment in MOA.

Final Words

In conclusion, we can say that the sub-division of shares is a potential action, which enhances the liquidity and flexibility for private limited companies. By providing the process, companies can adhere to the process effectively, manage compliance with legal needs, and provide transparent communication with shareholders. To follow these instructions, empower companies to have their share frameworks to completely evolve business requirements while protecting the integrity of their corporate governance.