as security for loans unlike the uncalled capital

it as security for loans unlike the uncalled capital. Moreover, reserve capital cannot be turned into ordinary capital without leave of the court nor it can be

cancelled in reduction of capital (Natal Land Company T(” Paulin Colliery Syndicate). It must however, be noted that reserve capital of a

company is different from its capital reserve which is always created out of company’s profit.

the directors cannot issue the new shares at their discretion. Because. if it is allowed, they may aIrot the new shares to their relatives, friends or their

nominees. Section 81. therefore, lays down that such shares must be offered to the existing equtiy shareholders of the company in proportion. as nearly

as the circumstances admit, of the shares held by them. This restriction is applied only when a public company proposes to increase its subscribed

capital by allotment ‘of further shares (whether equity or preference). after the expiry of two years from the incorporation of the company or after the expiry

of one year from the first allotment of shares, whichever is earlier.

When a company is to increase its authorized capital to accommodate the further issue of capital. then as per Sec. 94, a sanction ofthe shareholders in

the general meeting is required by passing an ordinary resolution after the board’s resolution.