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Procedure of increasing share capital of a company

Any Company limited by share capital or limited by guarantee and having share capital may alter its authorized share capital by increasing its share capital once the following conditions are met.

Step 1: Verification of authority from the Articles of Association

Section 63 of the Companies Act, provides that a Company may increase its share capital if so authorized/permitted under the Articles of Association, hence this is a first step in increasing share capital.

Step 2: Passing of a Resolution

Secondly, the powers authorized under the Articles of Association and conferred by the Companies Act are only exercised by the General Meeting. As such, a Resolution (special or Ordinary) of the members and shareholders of the company needs to be passed.

Step 3: Preparation of Notice of Increase of Share Capital and payment of Stamp Duty

Once a Resolution is passed, a Notice of Increase of Share Capital (Form 204) is prepared to be filed with the Registrar. Thereafter, stamp duty is paid on the additional share capital.

Step 4: Filing of a Notice of Increase of Share Capital

The Registrar is notified of increase of share capital by filing Notice of Increase of Share Capital (Form 204) within thirty (30) days of passing of such Resolution for registration as specified under section 65 of the Companies Act.

A company may thereafter allot the shares to the interested persons by filing Return of Allotment.

PROCEDURE FOR REDUCTION OF SHARE CAPITAL

A Company limited by guarantee and having share capital or company limited by share capital may alter its share capital, by amending its Memorandum of Association by reducing the amount of its share capital and of its shares accordingly. The procedure is however marked with clear line restrictions and checks to prevent fraud and protect the interests of creditors of the Company.

Reduction of capital may be effected in several ways:-

  1. Where redeemable preference share are redeemed.
  2. Where shares are perfected for non payment of calls.
  • Where un issued shares are cancelled.
  1. Reduction of liability on any of its shares in respect of share capital not paid up.
  2. Cancel any paid up share capital which is lost or is unrepresented by the available assets, that is, “diminution”.
  3. Pay off any paid up share capital which is in excess of the wants of the company.

Step 1: Authorization of the Articles of Association

Section 68 of the Companies Act specifies the requirement that the Company may only be able to alter its share capital by reducing share capital if the provisions of its Articles of Association so provides.

Step 2: Passing of a Special Resolution

Unlike the procedure for increase of share capital where an ordinary resolution needs to be passed, a mandatory special resolution by members and shareholders of the company is required to be passed to reduce share capital.

Step 3: Confirmation of Reduction by Court

This is done by application to the High Court through a petition. An order of the Court confirming reduction.

Step 4: Production and Registration of Reduction

The registrar, on production to him of an order of the  court confirming the reduction of the share capital of a company, and the delivery to him of a copy of the order and of a minute approved by the court, showing with respect to the share capital of the company, as altered by the order, the amount of the share capital, the number of shares into which it is to be divided, the amount of each share, and the amount, if any, at the date of the registration deemed to be paid up on each share, shall register the order and minute.

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Procedure for the registration of companies in Kenya https://capitaregistrars.co.ke/procedure-for-the-registration-of-a-limited-company-in-kenya-2/