CHAPTER V

CAPITAL AND SHARES

As has been seen in Chapter III, a clause (commonly the
fifth) in the memorandum of association of a company
limited by shares, must state ‘the amount of share capital
with which the company proposes to be registered, and the
division thereof into shares of a fixed amount’ [s. 2 (4)].

The amount of capital with which a company is registered,
or to which that amount is subsequently increased, is generally
called the nominal capital, or the authorised capital, of the
company. The phrases ‘issued capital’ and ‘paid up capital’
must be distinguished, since neither of these is necessarily
identical in amount with the nominal capital, or with the
other. Thus a company may have a nominal capital of
£100,000, divided into 100,000 shares of £1 each. If 60,000
shares have been issued and 15s. per share has been paid on
them, the issued capital is £60.000 and the paid up capital
£45,000.

The capital clause, being one of the conditions of the
memorandum, can only be altered in the mode and to the
extent for which express provision is made in the Act (s. 4).
The alterations so provided for are increase of capital,
consolidation of shares, conversion into stock and recon-
version into shares, subdivision of shares, cancellation of
shares (s. 50), and reduction of capital (s. 55). Such altera-
tions can now only be effected by the company in general
meeting whereas under the 1908 Act all but sub-division of
shares and reduction of capital could be effected by the
directors if the articles or a resolution of the company
authorised them so to do. The capital can also be reorganised
by a scheme of arrangement under s. 153.

As regards increase of capital, a company may, if authorised
by its articles, increase its capital by the issue of new shares
of such amount as it thinks expedient. Such increase need
not be authorised by the memorandum nor is a power
therein effective [re Dexine Co. (1903), W.N. 82], but it must
be authorised by the articles, and if the articles as originally
framed do not sanction such increase they must be altered
by special resolution before it can be effected. The power

[ncrease of
Capital,