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- SPLIT OF SHARES
A split of shares, commonly known
as a stock split, is a corporate action undertaken by a company to increase the
number of its outstanding shares while proportionally reducing the share price.
The primary purpose of a stock split is to make the shares more accessible and
affordable to a broader base of investors without affecting the overall market
capitalization of the company.
Reasons for Stock Splits:
1. Enhancing
Liquidity: By increasing the number of outstanding
shares, stock splits can enhance the liquidity of the company's stock. This
means there are more shares available for trading, making it easier for investors
to buy and sell them.
2. Broadening
Investor Base: Lowering the share price through a split can
attract more retail investors who may find the shares more affordable. This
broadens the investor base and can potentially increase demand for the stock.
3. Improving
Market Perception: Stock splits are often seen as positive
signals by investors and the market. A lower share price can make the stock
appear more attractive and affordable, potentially boosting investor
confidence.
4. Adjusting
to Market Norms: Stock exchanges and regulatory requirements
sometimes have minimum price or shareholding requirements for listed companies.
A stock split can help a company meet these requirements without affecting its
fundamental financial metrics.
In conclusion, a stock split is a
strategic corporate decision aimed at enhancing liquidity, broadening investor
participation, and adjusting the share price to make it more attractive to
potential investors, while maintaining the company's overall market value.
A clear, structured delivery process from start to finish
CA/CS specialist reviews your requirements and confirms scope.
We share a checklist and collect through our secure portal.
Our team files all applications with government authorities.
Certificates and audit-ready documentation delivered on time.
Practical answers curated by our CA and CS desks for SPLIT OF SHARES.
A share split means dividing the company’s existing shares into smaller units of reduced face value, while the total paid-up capital and ownership percentages remain unchanged.
Companies split shares to make their shares more affordable for investors, increase liquidity in the market, and attract a broader investor base.
No. A share split only increases the number of shares while reducing their individual face value. The total investment value remains the same.
Yes. After a share split, the share price decreases proportionally, making it easier for small investors to buy shares and participate in the company’s growth.
Section 61 of the Companies Act, 2013 governs the sub-division (split) of shares, along with the Companies (Share Capital and Debentures) Rules, 2014.
The
Board of Directors must first approve the proposal, followed by shareholder
approval through an ordinary resolution in a general meeting.
Form SH-7 is filed with the ROC along with a copy of the resolution and the altered Memorandum of Association reflecting the new share capital structure.
No. A company cannot proceed with a share split unless it is approved by shareholders in a properly convened meeting.
No. The paid-up capital remains the same since only the number of shares and their face value change proportionally.
If fractions arise, the company may either round them off, issue additional shares, or compensate the shareholder in cash, depending on its policy
The market price of the share decreases in proportion to the split ratio, but the company’s overall market capitalization remains unchanged.
No, the shareholder’s percentage ownership and voting rights remain the same. Dividends are adjusted proportionately to the new number of shares.
We manage the complete process—from board resolutions and shareholder meetings to ROC filings, compliance checks, and share certificate updates.
Documents include the company’s Memorandum and Articles of Association, Board Resolution, and details of existing share capital.
Typically, it takes between 10–15 working days, depending on the speed of approvals and ROC processing time.
Yes. We provide end-to-end support including ROC filing, shareholder communication, and ensuring all legal formalities are completed accurately.
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