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Increase in Authorized Capital

Increase in Authorized Capital refers to the process of increasing the maximum amount of capital that a company is authorized to issue to its shareholders. The authorized capital of a company is the maximum amount of capital that it can raise by issuing shares to its shareholders. It is stated in the company’s Memorandum of Association (MoA) and Articles of Association (AoA).Increasing the authorized capital does not mean that the company is immediately raising additional capital or issuing new shares.
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Overview
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Procedure
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Faq's

Overview of Increase in Authorized Capital

The authorized capital is the maximum amount of capital which can be raised by a Company through the issue of shares to its shareholders. An increase in authorized capital might be required for issuing new shares and/or inducing more capital into the Company. Our professional can help you concerning the filing and issuing of shares concerning the increase in the authorized share capital of the Company.

Authorized Capital is mentioned in the capital clause of the Memorandum of Association of the company. And if the company wants more capital then, the capital clause has to be amended by the members by passing a special or ordinary resolution (as there is no specification about nature of resolution under S. 61) as per S. 61 of the Companies Act, 2013 at a meeting. Following are the pre-requisite before filing an application to MCA for an increase in the authorized capital:

• Check/verify whether AoA provides for an increase in authorized capital. If it does not provide then the same must be amended to the effect under section 14 of the Companies Act, 2013 by passing a special resolution.
• A board meeting for notifying the call for Extraordinary meeting (EGM) must be held.
• An ordinary or special resolution (preferably Special resolution) for an increase in authorized capital i.e. for alterations in MoA & AoA must be passed in such EGM.

After fulfilling the above pre-requisite, file the prescribed form i.e. e-Form SH-7 with the registrar within 30 days of passing of the ordinary resolution. Following documents must be attached:

• Board Resolution for an increase in authorized share capital.
• Board resolution for modification in the capital clause of MoA.
• Shareholder’s resolution passed in EGM.
• Altered copy of MoA & AoA.

Advantages of Increase in Authorized Capital

  1. Flexibility: Increasing the authorized capital of a company provides it with the flexibility to issue more shares in the future if needed, without having to go through the process of amending its MoA and AoA again.
  2. Funding: Increasing the authorized capital makes it easier for a company to raise additional funding by issuing new shares to its shareholders or other investors.
  3. Improved creditworthiness: A company with a higher authorized capital may be perceived as more creditworthy by lenders and investors, as it has the potential to raise more capital if needed.
  4. Investment opportunities: With a higher authorized capital, a company can pursue new investment opportunities and expand its business operations.
  5. Valuation: Increasing the authorized capital can also have a positive impact on the company’s valuation, as it can lead to a higher market capitalization and share price.
  6. Mergers and Acquisitions: Companies with higher authorized capital are also more attractive targets for mergers and acquisitions, as they can facilitate larger transactions.

Registration Process

Step 1: Documentation: Once you have gone through the stage of passing requisite resolutions in the Board meeting & EGM and, provided the required Information and Documents for further processing, we will prepare the requisite documentation.

Step 2: Increased Authorised capital: Once the documentation is done and verified by the Legal Suvidha Expert, we will e-sign and file the requisite forms, and the Authorised Capital of your business is increased after the approval of RoC.

Required Documents

1. Board resolution for notice of EGM of the Company.

2. Notice of Extraordinary General Meeting

3. Ordinary Resolution.

4. Altered Memorandum and Articles of the Company.

FAQ's Increase in Authorized Capital :-

The Authorized Share Capital has to be minimum Rs. 1 Lac and there is no minimum limit for Paid-up Share Capital.
The Authorized Capital of the Company is the maximum limit up to which a company can issue shares and Paid Up Capital is that part of the Authorized Capital for which Shareholders have invested in the Company.
MOA, AOA, documents for Board Meeting of the Company and documents for Extra-Ordinary General Meeting (EGM) of the Company.
The time limit is 30 days from passing of the Board Resolution for Increasing of Authorized Share Capital.
A company can increase its authorized capital by filing Form SH-7 within 30 days from the date of passing the resolution i.e. from the date of alteration.
Yes, Holding of AGM is mandatory to increase authorized share capital.

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2. Payment

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3. Process

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4. Confirmation

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