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Increase In Paid UP Capital

Every business requires additional funds over time to sustain and expand its operations. These financial needs can be short-term or long-term. Short-term funding can be met through loans and advances, but for long-term growth, a company needs a larger capital base.

For a Private Limited Company, one way to raise long-term funds is by increasing its authorised capital. Since private companies are governed by the Companies Act, any structural changes, including capital modification, must comply with the legal provisions and regulations outlined in the Act.

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Complete Your File Increase In Paid UP Capital

Why Should I Use Auriga Accounting of Increase In Paid UP Capital ?

Auriga Accounting has a team of registration experts who can provide complete guidance to Increase In Paid UP Capital.

book appointment

Our team of experts will get in touch with you and collect all necessary documents and details

Resolve all your queries

We fill out and file your application for Event Based Compliance

Complete your Event Based Compliance

Complete Your File Increase In Paid UP Capital

Overview
Authorized
Reasons
Documents
How
Convening
Procedure

OVERVIEW - Increase In Paid UP Capital

What is Annual Compliance For a One person Company?

Paid-up capital refers to the total amount of money a company receives from shareholders and investors when issuing shares directly through the primary market. In simple terms, it is the capital raised when investors purchase shares directly from the company.

When shares are traded in the secondary market, the transaction occurs between investors, and the company does not receive any additional funds. As a result, no new paid-up capital is generated from secondary market trading.

As per Section 2(8) of the Companies Act, 2013, Authorized Capital refers to the maximum share capital a company is legally permitted to issue, as stated in its Memorandum of Association (MoA).

A company can expand its business only up to the limit of its authorized capital. If additional funds are required beyond the existing limit, the company must increase its authorized capital before issuing new shares.

Authorized Capital vs. Paid-Up Capital

  • Authorized Share Capital – The total potential share capital a company can issue.
  • Paid-Up Capital – The actual capital issued, subscribed, and paid for by shareholders.

A company’s paid-up capital cannot exceed its authorized capital. If a company reaches its authorized capital limit but wants to onboard new shareholders, it has two options:

  1. Increase Authorized Share Capital – Amend the MoA and raise the capital limit before issuing new shares.
  2. Transfer of Shares – Existing shareholders can sell or transfer their shares to new investors.

Reasons for Increase In Paid UP Capital

A company may decide to increase its authorized capital for various strategic and financial reasons, including:

  • Raising substantial funds to support business growth and expansion.
  • Financing new projects or business ventures.
  • Facilitating mergers or acquisitions by infusing additional capital as part of a restructuring plan.
  • Issuing additional shares to attract new investors or meet shareholder demand.
  • Converting debt into equity to strengthen the financial structure.
  • Meeting regulatory or compliance requirements, if necessary.

Documents Required for Increase In Paid UP Capital

To formalize the increase in authorized capital, specific documents must be filed within 30 days of shareholder approval. For private companies, this requires submitting e-Form SH-7, while e-Form MGT-14 is not mandatory.

The key documents required include:

  • Amended Memorandum of Association (MoA) reflecting the increased capital.
  • Updated Articles of Association (AoA), if modifications were made to allow the increase.
  • Copy of the Ordinary Resolution approved by the shareholders during the general meeting.



How Increase In Paid UP Capital

Companies can increase their paid-up capital through several methods, including:

  1. Issuing Additional Shares
  • The most common method is issuing new shares.
  • This can be done through:
    • Rights Issue – Offering additional shares to existing shareholders.
    • Public Offering – Issuing shares to new investors.
  1. Converting Reserves into Paid-Up Capital
  • Companies can transfer retained earnings or reserves into equity.
  • This strengthens the company’s capital base without requiring external funding.
  1. Capitalizing Debts
  • Converting company debt into equity helps increase paid-up capital.
  • This reduces financial liabilities while enhancing shareholder value.
  1. Share Buyback Adjustment
  • A share buyback reduces the number of outstanding shares.
  • This increases the value of the remaining shares, effectively raising the company’s paid-up capital.

Convening a Board Meeting for Increase In Paid UP Capital

To increase a company’s authorized share capital, the board must follow a structured process to ensure compliance with legal regulations.

  1. Issue Notice for Board Meeting
  • Send a formal notice to all directors at least 7 days in advance to their registered addresses.
  • The notice should clearly outline the meeting agenda, including the proposal to increase the authorized capital.
  1. Pass Board Resolution
  • In the board meeting, pass a resolution to convene an Extraordinary General Meeting (EGM).
  • Issue a notice for the EGM as per Section 101 of the Companies Act, 2013.
  • Seek shareholder approval for the amendment of the Memorandum of Association (MoA) through an Ordinary Resolution, in accordance with Section 60 of the Act.
  1. Notify Shareholders
  • Communicate the EGM details to shareholders, including:
    • Agenda (Proposed increase in authorized capital)
    • Date, time, and venue of the meeting
    • Voting process for resolution approval
  1. Distribute EGM Notice
  • Ensure the EGM notice is sent to the following parties:
    • Directors
    • Shareholders
    • Auditors
  1. EGM Notice Period
  • Issue the EGM notice at least 21 days before the meeting.
  • A shorter notice period is allowed if 95% of voting-eligible members agree, either in writing or via electronic means.

Procedure to Increase In Paid UP Capital

To increase a company’s authorized share capital, the board must follow a structured process to ensure compliance with legal regulations.

  1. Issue Notice for Board Meeting
  • Send a formal notice to all directors at least 7 days in advance to their registered addresses.
  • The notice should clearly outline the meeting agenda, including the proposal to increase the authorized capital.
  1. Pass Board Resolution
  • In the board meeting, pass a resolution to convene an Extraordinary General Meeting (EGM).
  • Issue a notice for the EGM as per Section 101 of the Companies Act, 2013.
  • Seek shareholder approval for the amendment of the Memorandum of Association (MoA) through an Ordinary Resolution, in accordance with Section 60 of the Act.
  1. Notify Shareholders
  • Communicate the EGM details to shareholders, including:
    • Agenda (Proposed increase in authorized capital)
    • Date, time, and venue of the meeting
    • Voting process for resolution approval
  1. Distribute EGM Notice
  • Ensure the EGM notice is sent to the following parties:
    • Directors
    • Shareholders
    • Auditors
  1. EGM Notice Period
  • Issue the EGM notice at least 21 days before the meeting.
  • A shorter notice period is allowed if 95% of voting-eligible members agree, either in writing or via electronic means.

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