Companies Act Section 64

Companies Act Section 64: Notification Requirements for Alteration of Share Capital

Introduction to Registrar Notifications for Share Capital Changes

Section 64 of the Companies Act mandates that any company altering its share capital must notify the Registrar of Companies within a specific timeframe. 

These notifications ensure transparency and compliance, enabling regulatory authorities to maintain accurate records of companies’ share capital. 

This section plays a critical role in corporate governance by establishing clear guidelines for companies to follow whenever they make changes to their share capital structure, helping regulators keep track of significant corporate developments.

1. Scenarios Requiring Notification to the Registrar

According to Section 64, companies must file a formal notice with the Registrar when altering share capital in any of the following ways:

(a) Alterations as Specified in Section 61(1): 

If a company alters its share capital under Section 61(1), it must notify the Registrar. 

Section 61 outlines various methods for a company to alter its capital, such as increasing the authorized share capital, consolidating or subdividing shares, or cancelling unissued shares. 

Since each of these actions affects the company’s capital structure, the law requires a formal update to the Registrar to reflect the current status of the company’s authorized, subscribed, and paid-up capital.

(b) Government Orders Increasing Authorized Capital (per Section 62): 

The notification requirement also applies when the government issues an order under Section 62(4) that, in conjunction with Section 62(6), results in an increase in a company’s authorized capital. 

Such an increase may occur, for instance, when a government order mandates the conversion of debentures or loans into shares. 

To maintain transparency in the company’s capital, the Registrar must be informed of this increase, ensuring that any government-mandated changes are recorded in official company records.

(c) Redemption of Redeemable Preference Shares: 

If a company redeems its redeemable preference shares, it must notify the Registrar. Redeemable preference shares are a type of share capital that the company commits to buy back at a predetermined future date or upon the occurrence of a specific event. 

Redemption reduces the company's outstanding share capital, and the Registrar needs to record this decrease to ensure that public records accurately reflect the company’s current capital structure.

By requiring notification under these specific circumstances, the Act helps maintain a consistent and transparent corporate record, preventing discrepancies between a company’s internal records and the official records held by the Registrar.

2. Filing Procedure and Time Limit for Notice Submission

The Act stipulates that the company must file the required notice with the Registrar within 30 days of the capital alteration, increase, or redemption. This requirement ensures that updates to the company’s share capital structure are promptly reported, minimizing the potential for outdated information to appear in the public record.

Notice in Prescribed Form: 

The notice submitted to the Registrar must be filed in a format prescribed by regulatory authorities. This format ensures uniformity in reporting, making it easier for regulators to verify and update records systematically. 

The form will generally require specific information about the nature and amount of the change in share capital, as well as supporting documentation where applicable.

Altered Memorandum of Association: 

When filing this notice, the company must also include an updated copy of its memorandum of association. The memorandum is a core document that outlines the company's authorized capital and serves as a foundational legal document. 

By including an altered memorandum, the company ensures that the official documents accurately reflect the latest capital structure.

3. Consequences for Non-Compliance with Notification Requirements

The Companies Act imposes financial penalties on companies that fail to notify the Registrar within the specified timeframe. This penalty provision serves as a deterrent, encouraging companies to adhere strictly to the reporting requirements set forth in Section 64.

Daily Penalty for Delay: 

If a company does not comply with the 30-day notification period, it is liable for a penalty of 500 rupees per day for each day the delay continues. 

This daily fine ensures that companies have a strong incentive to file the required notice promptly to avoid accumulating significant financial penalties.

Maximum Penalty Limits: 

While the daily penalty continues for the duration of the non-compliance, the Act does set a maximum cap. 

For companies, the maximum penalty is five lakh rupees, and for individual officers of the company who are in default, the maximum penalty is one lakh rupees. 

These caps provide a balanced approach by imposing strict penalties for prolonged non-compliance without making them unduly punitive. 

Officers held in default may include directors, company secretaries, or other executives responsible for compliance, ensuring accountability at both the corporate and individual levels.

4. Importance of Compliance with Section 64

Section 64 underscores the importance of keeping corporate records up-to-date and ensuring transparency in a company's capital structure. 

Accurate records benefit shareholders, regulators, and the general public by providing current and accurate information about a company's financial structure. Compliance with this section helps:

Maintain Transparency: 

By requiring companies to notify the Registrar of any changes in share capital, the Act ensures that the company’s public records remain up-to-date. 

This transparency is crucial for shareholders, creditors, and potential investors who rely on the accuracy of corporate records to make informed financial and investment decisions.

Enable Regulatory Oversight: 

Accurate and timely updates allow regulatory bodies to maintain a thorough understanding of a company’s financial situation and detect any potential irregularities. 

This requirement aids in maintaining corporate governance standards and prevents companies from misleading stakeholders about their true financial position.

Protect Shareholders' Interests: 

When companies properly file notices of capital changes, shareholders receive an accurate view of the company's capital structure and potential risks or opportunities. 

This transparency helps shareholders monitor their investments effectively and ensures that companies act in their best interests.