Increase in Authorized Capital

An increase in authorised share capital is one of the most routinely-fumbled MCA filings in India. Founders and finance teams treat it as a clerical step before the next round of equity issuance — pass a resolution, file Form SH-7, done. The Companies Act 2013 disagrees. Section 61 read with Section 13 sets a sequenced process — a check of the Articles to confirm whether they contain an enabling provision (and if not, a Section 14 special resolution to amend them first), an ordinary resolution under Section 61(1)(a), an alteration of Clause V of the Memorandum of Association, payment of State Stamp Act duty on the increase in authorised capital under the relevant Stamp Schedule, payment of MCA filing fees on the incremental capital, and filing of Form SH-7 within 30 days of the resolution under Section 64.

Each step has its own failure mode. Articles with no enabling clause and an ordinary resolution passed regardless — the resolution is invalid and SH-7 is rejected. State Stamp Act under-paid because the company assumed a flat fee — SH-7 returned. MGT-14 forgotten where the AOA also had to be amended — the entire change held up. EGM notice issued without the Section 102 explanatory statement — resolution challengeable. We see all of these every quarter, and the rectification path costs more than doing the filing right would have.

We run the full mandate end-to-end — AOA enabling-clause review and Section 14 amendment if needed, EGM notice and ordinary resolution, MOA Clause V amendment, State Stamp Act computation across Maharashtra / Karnataka / Tamil Nadu / Delhi / Gujarat / Telangana / Haryana, MCA filing-fee computation on the SRN portal, MGT-14 (where AOA amendment) within 30 days, Form SH-7 filing within 30 days, and post-filing register updates ahead of the equity issuance the capital increase was intended to support.

What the Increase Actually Involves Under Sections 13 & 61

• AOA Enabling-Clause Review (Section 14):: The Articles of most well-drafted private companies contain a clause permitting alteration of authorised capital by ordinary resolution. Older or template-drafted AOAs sometimes don't — or worse, require a special resolution. We read the AOA before the EGM is convened. Where the AOA does not contain an enabling clause, a Section 14 special resolution is passed to amend the AOA first, and MGT-14 is filed within 30 days under Section 117.

• Board Resolution & EGM Notice:: The Board approves the proposal and convenes an EGM with a Section 102-compliant explanatory statement disclosing the rationale, current and proposed authorised capital, and use of the increased capital. Clear-day notice issued to all members.

• Ordinary Resolution Under Section 61(1)(a):: Members pass an ordinary resolution authorising the increase in authorised share capital. Where the AOA requires a special resolution, a special resolution is passed instead.

• MOA Clause V Amendment:: Clause V of the MOA — which sets out the authorised capital and the division into shares of a fixed nominal value — is altered to reflect the new authorised capital. The altered MOA forms part of the SH-7 attachment.

• State Stamp Act Duty on Capital Increase:: Under the Indian Stamp Act read with the Stamp Schedule of the State in which the registered office is situated, stamp duty is payable on the differential between the existing authorised capital and the new authorised capital. Rates vary materially — Maharashtra, Karnataka, Tamil Nadu, Delhi, Gujarat, Telangana and Haryana each have their own slab and ceiling. Some States cap the duty at a maximum (Delhi, Karnataka), others have ad valorem percentages with no cap (Maharashtra). Computing the right number State-by-State is not optional.

• MCA Filing Fee on Incremental Capital:: Under the Companies (Registration of Offices and Fees) Rules 2014, the MCA levies a filing fee on the incremental authorised capital, slabbed by capital range. This is paid on the SRN portal at the time of SH-7 filing.

• Form SH-7 — Within 30 Days (Section 64):: Form SH-7 is filed with the ROC within 30 days of the resolution, with the altered MOA, board and members' resolution, EGM notice with explanatory statement, AOA (if amended), stamp-duty challan and DSC of director and certifying professional.

• MGT-14 (Where AOA Amended):: Where the AOA had to be amended under Section 14 to provide an enabling clause, MGT-14 is filed within 30 days of the EGM under Section 117 — independently of, and ahead of, SH-7.

Post-Filing Register & Capital-Issuance Sequence:
Statutory register of members and capital structure updated; the increased authorised capital becomes the headroom for the next allotment / private placement / preferential issue / rights issue under Sections 42, 62 or 63, each of which has its own filing route.

Why DIY Capital Increases Get Returned at SH-7

Common defects — Section 102 explanatory statement absent or generic; AOA does not contain an enabling clause and the ordinary resolution is invalid; MOA Clause V amendment forgotten and SH-7 filed against an unaltered MOA; State Stamp Act duty under-paid because the company assumed a flat fee or used the wrong State's Schedule; MGT-14 missed where AOA was amended; SH-7 filed beyond 30 days and additional fee accrues; allotment of new shares attempted before SH-7 is approved and the cap-table is left in disarray. Each is fixable, but each adds weeks and rectification cost.