Increase in Authorized Capital

Your company has hit the ceiling. The next funding round needs more shares allotted than your authorised capital allows, or a rights issue is on the table, or a bonus issue is being declared — and the headroom simply isn't there. Increasing your authorised share capital is the legal precondition for any of these. Get the sequence wrong and the subsequent allotment is challenged at the Registrar level.

The job has four moving parts: a check of your Articles of Association for an enabling clause, an EGM where shareholders approve the alteration, State stamp duty paid on the increment, and Form SH-7 filed with the MCA within 30 days. Each step has its own statutory window, and missing any one of them triggers additional fees, invalidated resolutions, or a stuck cap table.

At a Glance

• Who needs it: Any private or public company running out of authorised share capital ahead of a fresh allotment, rights issue, bonus issue or ESOP grant.
• Governing law: Sections 13, 14, 61, 64 and 117 of the Companies Act 2013, read with the Companies (Share Capital and Debentures) Rules 2014.
• Approval type: Ordinary resolution under Section 61(1)(a) where the AOA permits; special resolution under Section 14 first if the AOA needs amendment.
• Filing form: Form SH-7 under Section 64 within 30 days of the resolution; Form MGT-14 under Section 117 within 30 days where the AOA is amended.
• Stamp duty: State Stamp Act on the differential authorised capital — rates and ceilings vary materially by State of registered office.
• Turnaround: 10-20 working days end-to-end, depending on EGM notice period and the State's e-stamping channel.
• What changes: MOA Clause V altered, AOA enabling clause inserted where missing, statutory registers updated, cap table reconciled against new headroom.

What's New for FY 2026-27

The mechanics of a capital increase have been stable for years, but the surrounding portal, fee structure and adjacent compliances have shifted under MCA V3 and the DPDP Act. A few changes matter for filings being done this financial year.

• MCA V3 portal stable: SH-7 and MGT-14 are both filed through the V3 webform mode with DSC-based association; director and professional DSCs must be re-associated on V3 before filing or the form will not submit.
• Filing fee on incremental capital: The V3 portal now auto-computes the filing fee on the differential between existing and proposed authorised capital under the Companies (Registration of Offices and Fees) Rules 2014 — manual challan generation is no longer accepted.
• e-Stamping mandatory in most States: Maharashtra, Karnataka, Delhi and several others now accept only SHCIL or State-portal e-challan; physical stamp paper is rejected at the Registry, so the challan has to be generated digitally before the EGM.
• DPDP Act sequencing: Where the capital increase is followed by a private placement requiring KYC of allottees, the DPDP Act 2023 notice-and-consent requirements now apply to the allottee data collected at PAS-4 stage.
• Dematerialisation pre-check: Non-small companies must already hold ISIN-registered shares before any fresh issue against the new headroom under Rule 9B, so demat status is now part of the standard EGM checklist.

Why You'd Increase Authorised Capital

An authorised-capital increase is rarely a standalone exercise — it is almost always the legal precondition for something else the company wants to do.

• Fresh funding round: A Series A, B or seed extension needing more equity than your existing authorised pool — SH-7 has to be approved before the PAS-3 for the allotment can go through.
• Rights issue to existing shareholders: A Section 62(1)(a) rights issue requires sufficient authorised headroom before the offer letters are dispatched; the increase is sequenced ahead of the rights cycle.
• Bonus issue from reserves: A Section 63 bonus issue capitalises reserves into share capital, so the authorised pool must accommodate both existing paid-up and the new bonus shares.
• ESOP pool expansion: Granting fresh ESOPs against the existing pool needs headroom; companies routinely top up authorised capital before a new ESOP scheme is rolled out.
• Conversion of debt or instruments: Convertible notes, SAFE-equivalents or compulsorily convertible preference shares converting to equity need headroom against which the conversion shares are issued.
• Restructuring or merger preparation: Schemes of arrangement, demergers and amalgamations often need pre-emptive headroom to absorb shares issued to incoming shareholders.
• Shareholder-agreement undertakings: Some SHAs and investor term sheets require the company to maintain authorised headroom at a defined multiple over paid-up capital.

How It Actually Works

The sequence matters. Skip the AOA check and the resolution is invalid; skip the stamp duty and the SH-7 is rejected; skip the MGT-14 and the AOA amendment is unenforceable. Here is how the steps actually run end-to-end.

Step 1: AOA Enabling-Clause Check

Section 61(1)(a) permits a capital increase by ordinary resolution only where the Articles authorise it. Modern AOAs from the SPICe+ template usually carry this enabling clause, but older Articles and custom-drafted Articles sometimes do not. The first job is to read the AOA carefully. If the enabling clause is missing, a Section 14 special resolution to amend the AOA is sequenced first, MGT-14 is filed within 30 days of that EGM, and only then is the Section 61 resolution validly passed.

Step 2: State Stamp Duty Computation

Stamp duty is levied by the State of the registered office on the differential between the existing and the new authorised capital. Maharashtra applies an ad valorem percentage with no overall ceiling. Delhi has a percentage with a monetary cap. Karnataka, Tamil Nadu, Gujarat, Telangana and Haryana each carry their own slab structures. Computing the right number is the single most-fumbled step in DIY filings — and it has to be done before the EGM is convened so the e-challan is ready by the filing date.

Step 3: Board Resolution and EGM Notice

The board first passes a resolution approving the capital increase in principle and authorising convening an EGM. The notice goes out with a 21 clear-day window unless members holding 95 per cent of paid-up voting capital consent to a shorter notice under Section 101. The notice carries a Section 102 explanatory statement setting out the rationale, the current and proposed capital, and the intended use of the headroom. Proxy forms and attendance registers are prepared in parallel.

Step 4: Resolution at the EGM

At the EGM, the Section 61(1)(a) ordinary resolution is passed altering MOA Clause V to reflect the new authorised capital. If the AOA also needs amendment, the Section 14 special resolution is moved and passed first, and the ordinary resolution for the capital increase follows. Both resolutions are recorded in the minutes, and certified true copies are extracted for the SH-7 and MGT-14 attachment lists.

Step 5: Stamp Duty and MCA Filing Fee

State Stamp Act duty is paid via the State's e-stamping channel — SHCIL or the State's own e-challan portal. The MCA filing fee on the SRN portal is auto-computed by V3 against the incremental authorised capital. Both challans are downloaded and held against the SH-7 attachment list before the form is opened on V3.

Step 6: SH-7 and MGT-14 Filing

Form SH-7 is filed under Section 64 within 30 days of the resolution, with the altered MOA, the resolution copy, the State stamp challan and the MCA fee challan attached. Form MGT-14 — where the AOA was amended — is filed independently under Section 117 within 30 days, with the altered AOA and the special resolution copy attached. Both forms are DSC-signed by an authorised director and certified by a practising CA, CS or CMA. Statutory registers and the cap table are updated against the new headroom.

A Real Example: A Bengaluru Pvt Ltd Raising Its Series A

Take a Bengaluru-registered private limited company sitting at ₹10 lakh authorised capital and ₹10 lakh paid-up. A new Series A round needs ₹40 lakh of fresh equity issued, taking authorised capital to ₹50 lakh.

• AOA check: The AOA was drafted off the SPICe+ template and contains the enabling clause, so a Section 14 special resolution is not required. MGT-14 is not triggered.
• Stamp duty (Karnataka): The Karnataka Stamp Act ad valorem rate applies on the ₹40 lakh increment; the e-challan is generated through the Karnataka e-stamping portal a week before the EGM.
• MCA filing fee: V3 auto-computes the SRN-portal fee on the ₹40 lakh increment under the Companies (Registration of Offices and Fees) Rules 2014; the challan is downloaded ahead of SH-7 filing.
• EGM and resolution: Board resolution passed; EGM notice with Section 102 explanatory statement issued with 21 clear days; ordinary resolution under Section 61(1)(a) passed at the EGM altering MOA Clause V.
• SH-7 filing: Filed on Day 18 after the EGM, well within the 30-day Section 64 window, with altered MOA, resolution copy and both challans attached.
• Allotment sequencing: The Series A allotment under Section 42 is scheduled for Day 22; the SH-7 SRN is approved by Day 25; PAS-3 is filed within 15 days of allotment and the cap table reconciles cleanly.

Total elapsed time from kickoff to PAS-3: about six weeks, with the capital increase itself taking the first three. No additional fees, no rejected forms, no stuck allotment.

What Backs Up Each SH-7 Filing

The MCA registry doesn't just want the form — it wants the paper trail behind it. Each SH-7 filing is backed by a defined set of supporting documents, and the absence of any one of them is a rejection ground at the SRN review stage.

• Altered MOA with revised Clause V: Clean copy showing the new authorised capital figure, signed and ready to attach.
• Board resolution and EGM notice: Certified true copies of the board resolution, the EGM notice with Section 102 statement, and the proxy and attendance records.
• Section 61 ordinary resolution: Certified true copy of the resolution as passed at the EGM, with the alteration of MOA Clause V text and the date.
• State Stamp Act e-challan: e-Stamping challan showing duty paid on the differential authorised capital, with the slab applied and the State of registered office matching.
• MCA filing fee challan: V3-generated challan computing fee on the incremental authorised capital under the Registration of Offices and Fees Rules.
• Altered AOA (where amended): Where Section 14 amendment was needed, the altered AOA showing the inserted enabling clause, attached to MGT-14.
• Professional certification: Practising CA, CS or CMA certification on SH-7 and MGT-14, with membership and certificate-of-practice details.

Where It Goes Wrong

Most failed capital-increase filings trace back to a handful of avoidable mistakes — usually in the days before the EGM, not at the filing stage.

• Skipping the AOA enabling-clause check: Passing the Section 61 ordinary resolution without first amending the AOA where the clause is missing — the resolution is invalid and the SH-7 is rejected.
• Computing stamp duty wrongly: Applying the wrong State's rate, missing the ceiling where one applies, or computing on the new authorised capital rather than the increment — the form is filed under-stamped and held in resubmission.
• Missing the 30-day filing window: Sections 64 and 117 each carry a 30-day window from the EGM; missing either window attracts MCA additional-fee slabs that escalate steeply with each month of delay.
• Filing SH-7 before stamp duty is paid: The State stamp challan must be attached at the time of SH-7 filing — filing without it triggers a resubmission notice from the Registrar.
• Forgetting MGT-14 when AOA is amended: Where the AOA enabling clause had to be inserted, MGT-14 is a separate filing under Section 117 and is independently rejected if filed beyond 30 days.
• Allotting before SH-7 approval: Allotting shares against the new headroom before the SH-7 SRN is approved — PAS-3 is rejected because the authorised capital on record is still the old figure.
• Forgetting to update statutory registers: The register of members and the capital-structure record must be updated post-SH-7 approval; auditors flag this at year-end and the company is exposed to non-maintenance penalty under Section 88.

The 30-day windows under Sections 64 and 117 are independent. A late MGT-14 does not extend the SH-7 window, and a late SH-7 does not extend the MGT-14 window.

What You Receive at the End

• Altered MOA with revised Clause V, signed and stamped
• Altered AOA (where Section 14 amendment was needed)
• Certified true copies of board resolution, EGM notice with Section 102 statement, and resolutions passed
• State Stamp Act e-challan and MCA filing-fee challan
• Form SH-7 acknowledgement and SRN approval letter from MCA
• Form MGT-14 acknowledgement and SRN approval letter (where filed)
• Updated statutory register of members and capital-structure record
• Reconciled cap table reflecting new authorised capital
• Filing index and compliance file for your records

How to Get Started

Send us your Certificate of Incorporation, current MOA and AOA, the latest MGT-7 or MGT-7A, and a note on the proposed new authorised capital and the reason for the increase. We read the AOA for the enabling clause, compute State stamp duty on the increment, and model the MCA filing fee under the V3 fee structure — all before the EGM is convened.

From there we draft the board resolution, the EGM notice with the Section 102 explanatory statement, and the altered MOA. The EGM is convened, resolutions are passed, stamp duty and filing fee are paid, and SH-7 (and MGT-14 where applicable) are filed inside their respective 30-day windows. The whole sequence runs ten to twenty working days, depending on EGM notice period and the State's e-stamping channel.