Form SH-7: Alteration of Share Capital
Form SH-7 is a crucial compliance document that companies must file with the Registrar of Companies (ROC) when they alter their authorized share capital. Filed under Section 64 of the Companies Act, 2013, this form is required for any increase, decrease, consolidation, conversion, or sub-division of share capital that necessitates changes to the Memorandum of Association (MOA).
The authorized share capital represents the maximum amount of capital a company is legally permitted to raise through share issuance. Any change to this limit requires proper authorization, documentation, and filing with the ROC through Form SH-7 within the prescribed timeline.
Types of Alterations Requiring SH-7
Increase in Capital
Raising the authorized share capital to accommodate future funding needs. Requires ordinary resolution (unless articles specify special resolution). Most common reason for filing SH-7.
Decrease in Capital
Reducing authorized capital that is in excess of requirements. Requires special resolution and confirmation from Tribunal/ROC. Complex process with creditor protection requirements.
Consolidation
Combining multiple shares into one (e.g., 10 shares of ₹10 into 1 share of ₹100). Requires ordinary resolution and filing SH-7 within 30 days.
Sub-division
Dividing shares into smaller denominations (e.g., 1 share of ₹100 into 10 shares of ₹10). Makes shares more affordable to small investors.
Conversion
Converting one class of shares to another (e.g., preference to equity). Requires approval from affected shareholders.
Cancellation
Cancelling unissued capital that has not been taken or agreed to be taken by any person.
Legal Framework and Due Dates
Governing Provisions
- Section 61: Power of limited company to alter share capital
- Section 64: Notice to Registrar for alteration
- Section 13: Alteration of Memorandum
- Section 101-114: General Meetings and resolutions
- Rule 15: Companies (Share Capital and Debentures) Rules, 2014
Due Date and Penalty
Due Date: Within 30 days of passing resolution
Late Fee: ₹200 per day of delay
No maximum cap on penalty
Step-by-Step Process for Capital Increase
Review Articles of Association
Check if AOA authorizes board to increase capital. If not, alter AOA first through special resolution (SR) to include the power.
Convene Board Meeting
Approve capital increase and fix date, time, and place for General Meeting. Pass resolution to propose alteration of MOA.
Issue Notice for EGM
Send notice to all shareholders at least 21 days before EGM. Include explanatory statement detailing reasons for increase and proposed utilization.
Hold Extraordinary General Meeting
Pass ordinary resolution (or special resolution if AOA requires) for capital increase. Approval by simple majority of votes cast.
Alter Memorandum of Association
Update Clause V (Share Capital) of MOA to reflect the new authorized capital. Ensure all copies of MOA are updated.
File Form SH-7
File SH-7 within 30 days of resolution. Attach altered MOA, notice, resolution, and pay stamp duty and government fees.
Required Documents
- ☐ Altered Memorandum of Association (showing new capital)
- ☐ Altered Articles of Association (if applicable)
- ☐ Certified copy of Ordinary/Special Resolution
- ☐ Notice of General Meeting with explanatory statement
- ☐ Board Resolution approving increase
- ☐ Proof of stamp duty payment
- ☐ Valuation report (for non-cash consideration, if any)
Stamp Duty on Capital Increase
Stamp duty is payable on the increased amount of authorized capital. Rates vary by state:
| State | Stamp Duty Rate |
|---|---|
| Maharashtra | 0.1% of increase amount |
| Delhi | 0.2% of increase amount |
| Karnataka | 0.15% of increase amount |
| Tamil Nadu | 0.2% of increase amount |
| Telangana | 0.1% of increase amount |
| Gujarat | 0.5% of increase amount |
Example: Increasing capital by ₹1 crore in Maharashtra: Stamp duty = ₹1,00,00,000 × 0.1% = ₹10,000
Government Fee Structure
| Increase Amount | Fee (₹) |
|---|---|
| Up to ₹1,00,000 | ₹500 |
| ₹1,00,001 - ₹5,00,000 | ₹1,000 |
| ₹5,00,001 - ₹10,00,000 | ₹2,500 |
| ₹10,00,001 - ₹25,00,000 | ₹3,500 |
| ₹25,00,001 - ₹1,00,00,000 | ₹4,500 |
| Above ₹1,00,00,000 | ₹5,000 |
Penalty for Non-Compliance
| Violation | Penalty |
|---|---|
| Late filing (per day) | ₹200 per day (no cap) |
| Company | Minimum ₹1,00,000, Maximum ₹5,00,000 |
| Officer in default | Minimum ₹50,000, Maximum ₹1,00,000 |
Decrease in Share Capital
Reduction of capital is more complex than increase and requires additional safeguards for creditors:
- 1. Special Resolution: Required in all cases
- 2. Tribunal/ROC Approval: Depending on type of reduction
- 3. Creditor Consent: May require consent or provision for creditor objections
- 4. Tribunal Order: Court-supervised reduction for complex cases
- 5. Publication: Public notice may be required
Note: Reduction of capital not backed by assets is heavily scrutinized. Proper justification and compliance are essential.
Best Practices
Planning
- ✓ Plan capital increase well in advance
- ✓ Consider future funding needs
- ✓ Check AOA provisions early
- ✓ Budget for stamp duty costs
Compliance
- ✓ File SH-7 within 30 days
- ✓ Pay stamp duty promptly
- ✓ Update all MOA copies
- ✓ Issue fresh share certificates