In a cooperative housing society, every resident must subscribe to society shares to become a member. A common question arises — can the society increase its share capital by allotting additional shares to existing members?
The answer is yes, subject to statutory and bye-law compliance.
Authority to Issue Additional Shares
A society can issue additional shares within the limit of its authorised share capital, as specified in its bye-laws approved by the Registrar.
The relevant provisions are contained in the Model Bye-laws, particularly Bye-laws 7, 8 and 166, which deal with:
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Authorised share capital
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Member liability
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Raising of funds
As long as the total issued share capital remains within the authorised limit, the managing committee can proceed with allotment of additional shares.
What If the Authorised Share Capital Is Exhausted?
If the society has already issued shares up to the maximum authorised limit, it cannot issue further shares unless:
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The bye-laws are formally amended, and
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Approval is obtained from the District Deputy Registrar (DDR)
The amendment process requires:
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Passing a resolution in the General Body
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Filing the amended bye-laws with the Registrar
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Submission of four copies of the revised bye-laws for approval
Only after registration of the amendment can additional shares be issued.
Purpose of Increasing Share Capital
Issuing additional shares is one of the legitimate methods by which a society can raise funds. The bye-laws must clearly specify:
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The maximum share capital any member can hold
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The fund limit of the society
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The purpose for which such funds will be utilised
Common scenarios where societies increase authorised share capital include:
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Redevelopment projects
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Amalgamation of societies
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Major repairs or infrastructure upgrades
Nature of Liability
At the time of registration, every society specifies whether its liability is:
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Limited, or
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Unlimited
Most housing societies operate under limited liability, meaning members’ liability is restricted to the value of shares held.
This structure is reflected in the bye-laws and governs the framework for raising share capital.
Important Considerations
While increasing share capital is legally permissible, the society must ensure:
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Transparency in decision-making
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Proper General Body approval where required
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Compliance with Registrar’s procedures
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Fair and uniform allotment of additional shares
The increase should align with the society’s objectives and financial requirements.
Conclusion
A housing society can increase its share capital by issuing additional shares, provided it remains within the authorised limit mentioned in its bye-laws. If the authorised share capital is fully utilised, the society must first amend its bye-laws with Registrar approval. Proper procedural compliance ensures that the fund-raising mechanism remains legally valid and transparent.
