Explanation
Under Section 94 of the Companies Act, a company limited by shares may in general meeting, if so authorized by its Articles of Association, alter the capital clause of its Memorandum of Association in any of the following ways:
(i) It may increase its share capital by issuing new shares.
(ii) It may consolidate and divide all or part of its share capital into shares of a large amount.
(iii) It may convert all or any of its fully paid-up shares into stock or reconvert that stock into fully paid-up shares of any denomination.
(iv) It may sub-divide its shares into shares of lower denomination.
(v) It may cancel those shares which have not been taken by any person and reduce the amount of its share capital.
After writing off other accumulated loss, fictitious assets, patents to be written off as far as possible.
Capital Reserves to be continued in Balance Sheet and above are to be transferred in this A/c.
In share split though the number of shares increases the Paid up capital remain unchanged and the dividend payout remains the same.
In Right Issue and Bonus issue, the number of shares as well as Paid up capital increases and the New Rights shares and Bonus shares are eligible for pro-rata dividend at the time of declaration of dividend.
In essence, private companies possess certain characteristics, significant of which is the unfettered right to restrict share transfers. Section 3(iii) of the Companies Act defines private company as a company, which by its articles-
“(a) restricts the right to transfer its shares, if any;
While public company is a company which is not a private company.
And moreover, the shares of a public company are freely transferable.
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