Presentation on Alteration of Share Capital which is the subtopic of Internal Reconstruction of a company.

1. Advance
Corporate
Accounting
PRESENTED BY
RAGHAV BHOJWANI

2. WE WILL LEARN ABOUT:
• What are stock and shares?
• What is Share Capital?
• What is Internal Reconstruction?
• Alteration in share capital
• Procedure to Alter Share Capital.
• Types of Alteration in Share Capital
• Journal Entries
• Example

3. What are Stocks
and Shares?
• Stocks refers to the slice of
ownership of one or more
companies.
• A share is the single smallest
denomination of a company's
stock. It often refers to the
ownership of a particular
company.

4. Share Capital
• Share is the share in the share capital of the company.
• Share capital is the total amount of money or property company has received
through selling his shares to its shareholders
• Share Capital are of three types: Authorized share capital, Issued Share capital,
Subscribed share capital.
• The Balance sheet shows the Subscribed Share capital.

5. Internal Reconstruction
o Internal reconstruction refers to the method
of corporate restructuring wherein existing
company is not liquidated to form a new
one.
o No new company is formed
o It is done to get the true and fair view of the
company.
o The assets are revalued, Ficticious assets are
removed, alteration in liabilities and
alteration in share capital.

6.  Alteration means a Change in the Appearance,
character or structure of something.
 Alteration of Share Capital refers to the
changes in the existing capital structure of
the firm.
 It is one of the way of Internal
Reconstruction.
 Alteration in share capital can be done if its
mentioned in the article of association of
company.
Alteration in Share Capital

7. Procedure to Alter Share Capital
• Check the authorization to alter
share capital in Article of association.
• Issue a Board notice with the agenda of the
meeting at least 7 days before the date of
the meeting.
• Hold a Board Meeting.
• Pass the Resolution for the Alteration of
Share Capital in the Board meeting.
• The Resolution passed is subject to the
approval of Shareholders Meeting.

8. • For holding a Shareholders Meeting, fix the date, time and venue for the meeting.
• Director is authorized to send notice of the Shareholders meeting to the
Shareholders.
• The notice for a Shareholders meeting should be issued at least before 21 days of
the meeting
• Hold a Shareholders meeting
• Pass the Resolution with the consent of the majority shareholders.
• After passing of the Resolution, the Registrar of the Companies (RoC) should be
notified about the Alteration in Capital within 30 days of the passing of
Resolution. If the Registrar is not notified about the Alteration within 30 days,
then the company or its officers will be liable to pay a fine up to 10,000 Rupees for
each day of delay and which can be extended to 5 lakh Rupees.
Procedure to Alter Share Capital

9. Types of Alteration in Share Capital.
Following are the ways to alter share capital:
Increase in share capital
Ø Consolidation of Shares
Ø Sub-Division of shares of higher denomination
into shares of lower denomination
Conversion of shares into stock
Cancellation of Shares
Alteration in share capital is only possible when it is permitted by the court or else
mentioned in the AOA and MOA of the company

10. Journal Entries
Issue of New Share Capital
Particulars Debit Credit
CashBank A/c
To Capital A/c
Consolidation of Shares
Assume that Rs. 100000 of share capital divided into 10000 shares of
Rs 10 each which is consolidated in 1000 shares of 100 each
Particulars Debit Credit
Share Capital A/c (10 x 10000)
To Share Capital A/c (100 x 1000)
100000
100000

11. Journal Entries
Sub-Division of shares of higher denomination into shares of lower denomination
Assume that Rs. 100000 of share capital divided into 1000 shares of Rs 100 each which is converted
in 10000 shares of 10 each
Particulars Debit Credit
Share Capital A/c (100 x 1000)
To Share Capital A/c (10 x 10000)
100000
100000
Particulars Debit Credit
Equity Share Capital A/c
To Equity Share Stock A/c
100000
100000
Conversion of Shares into Stock

12. Journal Entries
Particulars Debit Credit
Equity Share Capital A/c
To CashBank A/c
100000
100000
Particulars Debit Credit
Equity Share Stock A/c
To Equity Share Capital A/c
100000
100000
Conversion of stock into shares
Cancellation of shares

13. Example:
• Yes bank has many NPAs. The Bad loans of Yes Bank are estimated to be
around Rs.40000 crore (Gross NPA).
• The overall capital adequacy ratio dropped to 4.2 per cent from 16.3 per cent
in the preceding quarter.
• YES bank’s statutory liquidity ratio has breached the RBI’s minimum
requirement and so has its liquidity coverage ratio. The bank has thus
provided Rs 86 crore as a penalty to the central bank.

14. As per the government notification,
The Whole Board of Directors were Replaced.
The Authorized Capital of the Reconstructed Yes Bank shall stand altered to Rs. 6200
crore from the Rs.1100 crore earlier. The number of equity shares will stand altered
to 3000 crore. The capital of the reconstructed bank at Rs.2 face value per share would
be Rs. 6000 crores.
Authorized preference share capital shall continue to be Rs 200 crore.
Internal Reconstruction and Alteration in Share capital in YES Bank

15. ANY
QUESTIONS??

16. THANK YOU