Authorized Share Capital Increase
What is increase in Authorized Share Capital?
Increase in authorized capital means increase the existing authorized capital limit in the MOA of the company. Authorized share capital is the number of shares that a company can issue as stated in its memorandum of association. In general authorized capital is the maximum amount of share capital of the company that a company can issue to shareholders.
Why we need to increase the Authorized share Capital?
Company may need to increase its authorised share capital before issuing new equity shares and before increasing paid-up capital. Paid-up capital can never exceed from the company authorised capital. So if a company may want to increase in the paid up capital of the company, then first need to check the Authorized capital of the Company and also need to increase the company authorized capital accordingly.
What procedure we need to follow to change the Authorized Share Capital of a company?
Authorized share capital of the company can be increased at any time, subject to the section 61 (read with section 13 and 14) of the Companies Act, 2013.
Step-1 First verifying that the Increase in authorized capital is allowed in the Articles of the company is a pre-requisite to increasing authorised share capital. In case the Articles do not approve an increase, then Article need to amend to allow the same before proceeding as per the provision of Section 14 of the Companies Act, 2013.
Step-2 A board meeting is called wherein it is decided that an EGM is to be held to discuss and vote on the matter of raising authorised share capital.
Step-3 EGM will held on the date specified in Board Meeting and then the Ordinary Resolution under section 61(1)(a) of the Companies Act, 2013, will be passed to increase in authorised share capital of the Company.
Step-4 File form SH-7 within 30 days of passing of Ordinary Resolution with the concerned Registrar of Companies, with p
What is the consequence of non-filing the form for Increase in Authorized capital?
According to section 117 (2) If the company fails to file the resolution or the agreement under sub-section (1) before the expiry of the period specified under Section 403 with additional fee, the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.
Documents Required for Authorized Share Capital Increase
Process Involved
Step 1
Calling of Board Meeting
Step 2
Board Resolution
Step 3
Calling of EGM
Step 4
Ordinary Resolution
Step 5
Form SH-7
Step 6
Approval
FAQ'S
- Is there a need to pass Special Resolution for increase in authorised share capital ?
- Some professionals are of the view that for increase in authorised share capital Special Resolution is to be passed, since amendment in Memorandum of Association can be done by way of passing Special Resolution under section 13 of the Companies Act, 2013.
- What is authorised capital
- It means the maximum value of securities that a company can legally issue
- How much time does it take to complete the process through online?
- With proper documentation the process could complete within 10 days of time If there is any complication or delay in providing the documents, the time taken for the process may vary.
- When the additional duty is levied?
- After 30 days of passing ordinary resolution additional duty being levied upon the company.
