Every flat purchaser in a cooperative housing society is required to become a member of the society, and acquiring the prescribed share capital is an essential part of obtaining membership. Many members also wonder whether a society can increase its share capital by issuing additional shares. The answer is yes, but only by following the procedure laid down in the society’s bye-laws and applicable legal provisions.
Is It Mandatory to Take Society Shares to Become a Member?
Yes. Membership in a cooperative housing society is linked to holding the prescribed shares of the society.
When a flat owner is admitted as a member, they are required to subscribe to the share capital as specified in the society’s bye-laws. The share certificate issued by the society serves as evidence of the member’s ownership of those shares and their membership in the cooperative housing society.
Without complying with the share subscription requirements, a flat owner cannot ordinarily be admitted as a regular member of the society.
What Is the Purpose of Society Share Capital?
Share capital forms part of the society’s funds and represents the financial contribution made by members.
It serves several purposes, including:
- Establishing membership rights.
- Providing capital for the functioning of the society.
- Supporting activities permitted under the bye-laws.
- Reflecting each member’s participation in the cooperative structure.
The authorised share capital and the maximum number of shares that may be held by members are specified in the society’s registered bye-laws.
Can a Society Issue Additional Shares?
Yes. A cooperative housing society can issue additional shares to its members, provided the issue remains within the limit of the authorised share capital approved under its bye-laws.
If sufficient authorised share capital is available, the managing committee may proceed with the allotment in accordance with the bye-laws and applicable legal requirements.
What If the Authorised Share Capital Is Exhausted?
If the society has already exhausted its authorised share capital, it cannot issue additional shares unless it first increases that limit.
To do so, the society must:
- Amend its registered bye-laws.
- Increase the authorised share capital.
- Obtain approval from the District Deputy Registrar (DDR).
- Submit four copies of the amended bye-laws for registration and approval.
Only after completion of this process can the society allot additional shares beyond the earlier authorised limit.
Society’s Liability and Fund-Raising Powers
At the time of registration, every cooperative housing society is required to specify whether it has:
- Limited liability, or
- Unlimited liability.
The bye-laws must also clearly define:
- The manner in which society funds may be raised.
- The authorised share capital limit.
- The maximum shareholding permissible for any member.
- The purposes for which the funds can be utilised.
These provisions ensure financial discipline and transparency in the society’s operations.
Situations Where Additional Shares May Be Required
Increasing share capital may become necessary in several circumstances, such as:
- Redevelopment projects requiring additional funding.
- Amalgamation or merger of societies.
- Expansion of authorised capital for future financial needs.
- Compliance with revised financial planning approved by members.
In each case, the society must follow the procedure prescribed under its bye-laws and obtain the required statutory approvals.
Relevant Bye-law Provisions
Members seeking further guidance may refer to:
- Bye-law 7 – Provisions relating to share capital.
- Bye-law 8 – Limits and conditions governing share capital.
- Bye-law 166 – Amendment of bye-laws and related procedures.
These provisions collectively regulate how societies may raise funds and increase their authorised share capital.
Conclusion
Holding the prescribed shares of a cooperative housing society is a mandatory requirement for becoming a member. A society may issue additional shares to members as long as it remains within the authorised share capital specified in its bye-laws. If the authorised limit has been exhausted, the society must first amend its bye-laws, obtain approval from the District Deputy Registrar, and complete the prescribed registration process before allotting further shares.
