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Section 94 – The Companies Act,1956

The Companies Act, 1956

94. Power of limited company to alter its share capital.

(1) A limited company having a share capital, may, if so authorised by its articles, after the conditions of its memorandum as follows, that is to say, it may

(a)increase its share capital by such amount as it thinks expedient by issuing new shares;

(b)consolidate and divide all or any of its share capital into shares of larger amount than its existing shares;

(c)convert all or any of its fully paid up shares into stock, and re-convert that stock into fully paid up shares of any denomination;

(d)sub-divide its shares, or any of them, into shares of smaller amount than is fixed by the memorandum, so however, that in the sub-division the proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in the case of the share from which the reduced share is derived;

(e)cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled.

(2) The powers conferred by this section shall be exercised by the company in general meeting and shall not require to be confined by the Court.

(3) A cancellation of shares in pursuance of this section shall not be deemed to be a reduction of share capital within the meaning of this Act.


Directors of a company are within their powers to issue shares at par even if their market value is above par. These are matters of administrative policy and discretion. The discretionary power however being in the nature of fiduciary powers, must for that reason be exercised in good faith. Mala fides vitiate the exercise of such discretion; Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holdings Ltd., (1981) 51 Comp. Cas. 743: AIR 1981 SC 1298.

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The Companies Act, 1956

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