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Increase Authorized Capital

Increase Authorized Capital

Increasing the authorized share capital of a company in India requires compliance with the provisions of the Companies Act, 2013. Authorized capital is the maximum amount of share capital that a company is allowed to issue to shareholders as per its Memorandum of Association (MOA). To increase this capital, you need to follow a formal process.


Steps to Increase Authorized Capital in India

  1. Check the Articles of Association (AOA)

The first step is to ensure that the company’s Articles of Association (AOA) authorize the company to increase its share capital. If the AOA does not permit this, it will need to be amended by passing a special resolution.

 

  1. Board Meeting

Convene a Board Meeting: A board meeting must be called to discuss and approve the proposal to increase the authorized capital. The board will approve the increase and authorize calling an Extraordinary General Meeting (EGM) to seek shareholders’ approval.

Notice for EGM: After the board meeting, issue a notice for the EGM with the agenda to increase the authorized capital.

 

  1. Extraordinary General Meeting (EGM)

Pass a Special Resolution: Hold the EGM and pass a special resolution for increasing the authorized capital. The shareholders must approve the increase by voting on the resolution.

Alteration of MOA: The resolution will also alter the company’s Memorandum of Association (MOA), particularly the capital clause, to reflect the increased authorized capital.

 

  1. Filing with the Registrar of Companies (ROC)

Form SH-7: Within 30 days of passing the special resolution, file Form SH-7 with the ROC to inform them about the increase in authorized capital. The following documents must be attached:

Copy of the board resolution and special resolution.

Altered Memorandum of Association (MOA).

Notice of the EGM and its explanatory statement.

Filing Fees: Pay the requisite filing fees and stamp duty. The amount of fees will depend on the amount of the increased authorized capital.

 

  1. ROC Approval

After the submission of Form SH-7 and payment of fees, the Registrar of Companies will review the application. Once the ROC approves the form, the authorized share capital of the company is officially increased.

Required Documents:

Board Resolution: Approving the increase in authorized capital.

Special Resolution: Passed at the EGM for approval of the increase.

Altered MOA: Reflecting the updated authorized capital.

Notice of EGM: Along with explanatory statement.

 

Filing Fees:

The fees for filing Form SH-7 vary based on the amount by which the authorized share capital is being increased. Stamp duty also depends on the state where the company is registered and the amount of capital increase.

 

Timeline:

The process typically takes around 15-30 days, depending on how quickly the company can convene its board meeting and EGM, and how quickly the ROC processes the forms.

 

Key Points to Remember:

Ensure that the AOA allows for an increase in authorized capital; otherwise, amend the AOA first.

Follow all compliance and documentation requirements strictly to avoid penalties or delays.

After increasing the authorized capital, update all statutory records and reflect the new capital in financial statements and any related documents.