An Overview to Increase Authorized Capital

Authorized capital of a company comprises of number of shares a company can issue to its shareholders. Increase in authorized capital is very necessary for issuing new shares and investing more & more capital into the company. The starting capital of the company is usually Rs.1 lakh and it is clearly mentioned in the memorandum of association of the company. Shareholders’ approval is needed in case company wants to increase its authorized capital. A company can raise its authorized capital anytime with approval of shareholders & paying additional fee to the registrar of companies (ROC). A resolution must be passed by the board of directors to start the process of increase in authorized capital as well as for making necessary changes to the MOA & AOA of the company. It is one of the most critical decisions of the company that what would be the share capital and how can we increase the authorized share capital.

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Documents Needed to Be Filed by the Company to Increase the Authorized Capital

The documents needed to be filed by the company to increase the authorized share capital are as follows -

  1. Filing of form SH-7
  2. Altered copy of MOA & AOA
  3. Board resolution passed by the company
  4. Resolution passed in extra ordinary general meeting (EGM)
  5. Notice of EGM explanatory statement.

Process to Increase Authorized Share Capital

  • Verifying provision within the articles of association – In the first step, Company has to verify that whether any provision is made within the articles of association in relation to increase in authorized capital. If not, company has to amend the articles of association by passing a special resolution to proceed further as per section 14 of the companies act, 2013.
  • Organizing board meeting – In the second step, board meeting is organized to decide when & where extra ordinary meeting (EGM) will be held to discuss and vote on the matter pertaining to increase in authorized share capital. When the date, place & time of the EGM are confirmed by the board of directors, a notice will be issued to members/ shareholders / director as well as auditor of the company. The notice issued in the board meeting should have a voting method on the basis of which resolution is passed by the company to increase the authorized capital. In addition to it, the explanatory statement is also enclosed.
  • Extra ordinary general meeting – In the third step, extra ordinary general meeting is held and company decides upon increase in authorized share capital by the voting process. The voting is to be done by members, shareholders, directors and auditors of the company as per the process or method set up by the company. At the end of meeting, ordinary resolution is passed to increase the authorized share capital of the company.
  • ROC form documentation – As per section 64, company has to mandatorily file form SH-7 to the registrar of companies along with necessary fees & attachments within 30 days of passing of ordinary resolution. Company has to submit the following documents along with e-form SH-7 –
    • Board resolution to increase the authorized share capital
    • Altered MOA & AOA
    • Board resolution for modification in the capital clause of MOA
    • Shareholder’s resolution passed in extra ordinary general meeting (EGM)

    Finally, ROC will check the form as well as the attached documentations. If found satisfactory, ROC will approve the increase in authorized share capital of the company.

Authorized Capital FAQ’S

Authorized capital is the maximum capital that the company is legally authorized to issue to shareholders.
Documents needed to be filed by the company to increase the authorized capital are as follows –
  1. Filing of form SH-7
  2. Altered copy of MOA & AOA
  3. Board resolution passed by the company
  4. Resolution passed in extra ordinary general meeting (EGM)
  5. Notice of EGM explanatory statement
In case of no provision mentioned, company has to amend the articles of association first to proceed further to increase the authorized capital.
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