Increase Authorized Capital

An Overview of Authorized Capital

The maximum number of shares a private company can sell is regarded as its Authorized Capital. as per the Companies Act of 2013, there is no minimum capital requirement. Bypassing an ordinary resolution, the board amends the capital clause of the Memorandum of Association to issue new shares or increase the authorized capital.

What are the steps to ensure an increase in Authorized Capital?

• Firstly, one must comply with the provisions of the AoA to check if it allows an increase of authorized share capital.
• In case the AoA does not permit an increase, then it must be modified as per Section 14 of the Companies Act of 2013
• To modify the AoA, a board meeting must be called to approve the modification in AoA and the increase in authorized share capital.
• In order to modify the AoA to increase the Authorized Capital, another extraordinary general meeting must be conducted. To invite the board members, a notice must be announced.
• The time window must be – 7 days before the board meeting and 21 days before the EGM.

Benefits of increasing Authorized Capital

Increases Share Capital

The amount of increase in authorized capital can be whatever the board decides and will be mentioned in the MoA when modified. The overall share capital of the company will face a positive impact if there’s an increase in the authorized capital.

Enhances Borrowing Capacity

As the share capital increases, the company’s net worth also increases. This raises the company’s credibility, and its borrowing capacity in the market also increases.

Documents Required for Increasing Authorised Capital of the company

Within 30 days of getting approval from the shareholders, the documents must be filed to the MCA to start the process of Authorized Capital Increase.

• PAN card: The company’s PAN card.
• Certificate of incorporation: The copy of the certificate of company’s incorporation
• Articles of Association:
• Memorandum of Association: A copy of the MoA after necessary modifications
• Digital signature certificate: A DSC of a director of the company

The process to Increase the Authorized Capital

• It is crucial to verify whether the company’s AoA allows it to raise its authorized capital. A special resolution must be passed to amend it if the AoA doesn’t authorize it
• Decide the time, date, and place of the extraordinary general meeting at a board meeting and pass a resolution to increase the company’s authorized capital. All members/shareholders, directors, and auditors of the company should be notified of the meeting’s day, date, time, place, and agenda.
• Organize, hold, and conduct an EGM on the designated date, place, and time, and pass a resolution seeking shareholder approval. If any forms are required, they must be submitted within a certain timeframe.
• To raise the authorized share capital, the company’s Memorandum of Association must be amended.
• The form SH-7 must be filed with the registrar of companies within 30 days of the shareholders’ resolution being passed. Within 30 days of the resolution’s passage, you must also file form MGT-14 if the resolution is a special resolution.

Frequently Asked Questions