Increase In Authorizes Capital

As per Section 2(8) of the Companies Act, 2013, “Authorised Capital” refers to the maximum amount of share capital a company is permitted to issue as stated in its memorandum of association.

A company’s growth potential is limited by its authorised capital. If a business needs additional funds beyond its initial capital to expand, it must increase its authorised capital accordingly.

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OVERVIEW - Increase In Authorizes Capital

What is Annual Compliance For a One person Company?

Every business requires additional funds over time to sustain operations and drive growth. These financial needs can be both short-term and long-term. Short-term requirements can be met through loans and advances, but for long-term expansion, a company will need more substantial funding.

For a Private Limited Company, one way to secure these funds is by increasing its authorised capital. Since private limited companies are governed by the Companies Act, any structural changes must comply with the Act and its regulations.

Authorised vs. Paid-Up Capital of a Company

Increase In Authorizes Capital is the maximum value of shares a company is legally allowed to issue, as specified in its Memorandum of Association (MOA). In contrast, paid-up capital refers to the actual value of shares that have been issued, subscribed to, and fully paid for by shareholders.

A company’s paid-up capital cannot exceed its authorised capital. Therefore, if a company reaches its authorised capital limit and wants to issue more shares or bring in new shareholders, it has two options:

1. Increase its authorised share capital before issuing new shares.
2. Facilitate the transfer of shares from existing shareholders to new ones.

Increase In Authorizes Capital

An increase in authorised share capital means raising the maximum share capital a company can issue. This is typically done by amending the company’s Memorandum of Association (MOA).

Expanding authorised share capital allows a company to issue additional shares, enabling it to raise funds from existing or new shareholders. This process is crucial for business expansion, financing new projects, and meeting growing financial requirements.

Guidelines for Increase In Authorizes Capital

When increasing authorised share capital, certain guidelines must be followed based on the company’s name and the words used in it. Below are the applicable fees for specific terms in a company’s name:

₹5 lakhs – If the company name includes the words Hindustan, Bharat, or India.
₹10 lakhs – For using words like Enterprise, Products, Business, or Manufacturing.
₹50 lakhs – If the name contains terms such as Global, Intercontinental, Continental, Asian, or International.
₹50 lakhs – If Bharat, Hindustan, or India appears as the first word in the company name.
₹1 crore – For using words like International, Global, Universal, Continental, Intercontinental, Asiatic, Industry, Udhyog, or Industry anywhere in the firm’s name.
₹5 crores – If the company name includes the word Corporation, even once.

Benefits of Increase In Authorizes Capital

Increase in Authorised Capital
A company can determine its authorised capital, which is recorded in the Memorandum of Association (MoA). By increasing authorised capital, the company effectively raises its overall share capital, providing greater financial flexibility.
Enhanced Borrowing Capacity
A higher authorised capital boosts the company’s net worth, which in turn strengthens its borrowing capacity. This allows the company to secure larger loans and attract potential investors more easily.

Documents Required for Increase In Authorizes Capital

Companies must file the necessary documents with the Ministry of Corporate Affairs (MCA) within 30 days of obtaining shareholder approval for the increase in share capital.

For private companies, only Form SH-7 is required, and Form MGT-14 is not necessary.

Required Documents:

1. Digital Signature Certificate (DSC): A copy of the DSC from any authorised director.
2. Memorandum of Association (MoA): The latest or modified version reflecting the increased capital.
3. Articles of Association (AoA): The updated or revised version of the AoA.
4. Certificate of Incorporation: A copy of the company’s incorporation certificate.
5. PAN Card: A copy of the company’s PAN card.

Checklist for Increase In Authorizes Capital

✔ Review the AoA – Check if the Articles of Association (AoA) allow an increase in authorised capital.
✔ Modify the AoA (if required) – If the AoA does not permit it, amend it as per Section 14 of the Companies Act, 2013.
✔ Call a Board Meeting – Issue a notice for a board meeting to approve the increase in authorised capital.
✔ Schedule an Extraordinary General Meeting (EGM) – Notify shareholders to approve the amendment in the AoA and the capital increase.
✔ Notice Period Compliance – Send the board meeting notice at least 7 days before the meeting and the EGM notice at least 21 days in advance.

Post-Compliance Steps to Increase In Authorizes Capital

Step 1: Board Resolution

The company must hold a board meeting to review the authority provided in the Articles of Association (AoA). If the AoA does not permit an increase, it must be amended first.

Step 2: Ordinary Resolution

A general meeting is held where members pass an ordinary resolution to approve the increase in authorised capital and amend the Memorandum of Association (MoA) if required.

Step 3: Filing Required Documents

After passing the resolution, the company must file Form SH-7 with the Registrar of Companies (ROC). If a special resolution was passed to amend the AoA, Form MGT-14 must also be submitted within 30 days.

Step 4: ROC Approval

The ROC will review the submitted forms, verify compliance, and approve the increase. Once approved, the company’s master data is updated on the MCA portal.

Identify Amendment
- Determine the specific changes required in the MOA.
Hold Board Meeting (BM)
- Approve the amendment.
- Fix the date, time, and venue for the General Meeting.
Hold General Meeting (EGM)
- Obtain shareholder approval for the amendment.
- Issue a 21-day clear notice (or shorter with consent from requisite shareholders).
File Required Forms
- Submit Form MGT-14 within 30 days of passing the special resolution.

Procedure to Increase In Authorizes Capital

✔ Verify if the AoA allows an increase; if not, pass a Special Resolution to amend it.
✔ Hold a Board Meeting to fix the date, time, and venue for an Extraordinary General Meeting (EGM).
✔ Issue a notice to shareholders, directors, and auditors about the EGM.
✔ Conduct the EGM and pass the necessary resolutions.
✔ Amend the MoA to reflect the new authorised capital.
✔ File Form SH-7 with the ROC within 30 days of shareholder approval.
✔ If a Special Resolution was passed, submit Form MGT-14 within 30 days.

Reasons for Increase In Authorizes Capital

A company may need to increase its authorised share capital for various reasons, including:

Requirement for Additional Funds – To support business growth and expansion.
Financing New Projects – Raising capital for new ventures or expansions.
Mergers & Acquisitions – Infusing funds as part of a merger or strategic arrangement.
Issuing Additional Share Capital – To bring in new investors or shareholders.
Debt-to-Equity Conversion – Converting liabilities into equity for financial restructuring.
Compliance with Legal Requirements – Meeting statutory obligations and regulatory needs.

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Import Monitoring System

Other IEC License

Increase In Authorizes Capital

Apply NOW..

Why Should I Use Auriga Accounting of Increase In Authorizes Capital ?

book appointment

Resolve all your queries

Complete your Event Based Compliance

Why Should I Use Auriga Accounting of Increase In Authorizes Capital?

book appointment

Resolve all your queries

Complete your Event Based Compliance

OVERVIEW - Increase In Authorizes Capital

Authorised vs. Paid-Up Capital of a Company

Increase In Authorizes Capital

Guidelines for Increase In Authorizes Capital

Benefits of Increase In Authorizes Capital

Documents Required for Increase In Authorizes Capital

Checklist for Increase In Authorizes Capital

Post-Compliance Steps to Increase In Authorizes Capital

Procedure to Increase In Authorizes Capital

Reasons for Increase In Authorizes Capital

Get more details

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