Checklist for Splitting / Sub-Division of Shares: If you’re running a private limited company in India and planning to split or sub-divide your shares, you’re making a strategic move toward enhancing liquidity, improving ownership structure, and possibly onboarding new investors with lower entry costs.
But before you proceed, it’s crucial to follow the legal steps defined under the Companies Act, 2013 and maintain regulatory compliance to avoid future complications.
This article offers a complete compliance checklist for the sub-division of shares in private companies, including legal provisions, board/shareholder resolutions, ROC filings, and best practices in 2025.
📌 What is Share Split or Sub-Division?
Share split or sub-division of shares refers to dividing each existing share into multiple shares of a smaller face value without changing the overall capital.
🔍 Example:
If your company has 10,000 equity shares of ₹10 each, and you split them in a 1:10 ratio, you’ll end up with 1,00,000 equity shares of ₹1 each. The total capital remains ₹1,00,000.
🚀 Why Do Companies Split Their Shares?
- To increase liquidity and make shares more affordable
- To bring share capital in line with investor preferences
- To facilitate ESOPs, fundraising, or future allotments
- To correct face value mismatches or make the cap table more flexible
✅ Legal Provision: Section 61(1)(d) of the Companies Act, 2013
A company, if authorized by its Articles of Association (AoA), may sub-divide its shares into shares of smaller amount through a shareholders’ resolution in a general meeting.
📋 Checklist for Sub-Division of Shares – Private Limited Company (2025)
✅ 1. Check Articles of Association (AoA)
- Confirm if the AoA allows sub-division of shares.
- If not authorized, amend AoA first by passing a special resolution under Section 14 and file Form MGT-14.
🔍 Pro Tip: Most modern AoAs already contain this clause – but always double-check!
✅ 2. Hold a Board Meeting
- Issue notice to all directors with agenda, date, and draft resolution.
- Pass the following at the Board Meeting:
- Approve sub-division ratio (e.g., 1:10)
- Fix date, time, and venue for Extraordinary General Meeting (EGM)
- Approve notice of EGM with explanatory statement (per Section 102)
- Authorize a Director or CS to file forms and carry out actions
✅ 3. Issue EGM Notice to Shareholders
- Send EGM notice with explanatory statement at least 21 days in advance (can be waived off with 95% consent in private companies).
- Include:
- Reason for sub-division
- Impact on shareholding
- Draft of altered capital clause (if needed)
✅ 4. Conduct EGM and Pass Shareholder Resolution
- Pass ordinary resolution under Section 61(1)(d) for sub-division of shares.
- If AoA is being amended, pass special resolution under Section 14.
- Maintain minutes and attendance records.
✅ 5. File ROC Forms
| Form | Purpose | Timeline | Attachments |
|---|---|---|---|
| MGT-7A (Annual Return) | Reflect new capital post-split | Annually | Updated share structure |
| MGT-14 | If AoA is amended (Special Res.) | Within 30 days of EGM | Certified true copy of resolution, amended AoA |
| SH-7 | To record change in share capital structure | Within 30 days of EGM | Resolution, altered MoA (capital clause), board minutes |
⚠️ Form SH-7 must reflect the new number of shares and face value accurately.
✅ 6. Update Register of Members & Statutory Registers
- Update Register of Members (Form MGT-1)
- Update Register of Share Allotment and Register of Share Certificates Issued
✅ 7. Issue New Share Certificates
- Cancel old share certificates.
- Issue new certificates within 2 months from EGM date.
- Mention “Sub-division of shares approved on [Date]” in the new certificate.
- Keep copies signed by two directors or one director + company secretary.
✅ 8. Update Internal Documents and Systems
- Update:
- Cap table / capitalization statement
- ERP or share management software
- Investment records (if external funding involved)
✅ 9. Inform Stakeholders (Optional but Recommended)
- Notify bankers, investors, and key stakeholders for transparency.
- If applicable, update startup registration portals (DPIIT, MCA startup hub, etc.)
📌 Important Points to Remember
| Action Item | Status |
|---|---|
| AoA authorizes sub-division? | ✅ Check before proceeding |
| EGM held with proper notice and resolution? | ✅ Mandatory |
| SH-7 filed with altered capital clause? | ✅ Within 30 days |
| New share certificates issued? | ✅ Within 2 months |
| ROC master data reflects new share structure? | ✅ Cross-check post filing |
🧾 Penalties for Non-Compliance
Non-compliance with share capital alteration provisions can attract penalties under:
- Section 450 (general penalty – up to ₹10,000 + ₹1,000/day)
- Section 117 for failure to file resolutions (₹5 lakh for company + ₹1 lakh for officer)
🟢 Final Thoughts
Sub-division or splitting of shares can be a great move for private limited companies to enhance flexibility in fundraising, attract investors, and restructure ownership. However, compliance with Companies Act, 2013 and timely filings with ROC are non-negotiable.
A single mistake or delay in filing can lead to penalties or invalid share certificates. So, always follow this checklist and consult a qualified Company Secretary (CS) to handle the entire process with precision.
⚠️ Disclaimer
This blog is meant to provide a general overview of the procedure for sub-division of shares in private companies as per Indian laws. It is not a substitute for professional legal advice. Always consult a qualified Company Secretary or legal expert before executing any corporate action.
Non-compliance can cost far more than hiring a professional. Stay compliant, stay safe.