Increase of Authorized Capital of Company2023-08-09T23:19:55+05:30

Increase of Authorized Capital of Company

Throughout the course of business, a company may need to increase its authorized capital by issuing new shares or by inducting more capital into the Company.

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    Increase of Authorized Capital of Company

    Over a period of time, a company may need to expand its business and, therefore, require more funds. These funds can be infused by issuing shares, debentures, obtaining loans, and finance from banks, etc. While loans and debentures have to be repaid after a certain period of time, the company raises capital by way of equity or preference shares with the help of shareholders (owners).

    The maximum number of shares a company can issue to its shareholders is determined by the authorized capital of the company. The company may need to increase its authorized capital for issuing new shares or inducting more capital into the Company. The Memorandum of Association (MOA) of the Company mentions the initial authorized capital, usually kept as Rs. 1 lakh, under the Capital Clause.

    At any point in time, the company can increase its authorized capital with the shareholder’s approval and by paying the required stamp duty to the Registrar of Companies (ROC). However, the company should first check its Articles of Association (AOA) for provisions relating to increasing its authorized share capital.

    Stamp Duty for increase of Authorized Capital

    • The state where the company’s registered office address is situated determines the stamp duty that the company must pay for an increase in authorized share capital.
    • Stamp duty on Form SH-7 can be paid electronically through the MCA portal.
    • The amount of stamp duty shall vary as per the amount of increase in authorized share capital.

    Significance of Increasing Authorized Capital

    • Issue of Additional Capital

      The company can issue shares only up to the amount of authorized capital specified in the MOA. However, by increasing the authorized capital, the company can further issue new shares to investors and shareholders, thus receiving additional capital in the company for business expansion.

    • Relevant for IPO/FPO Purpose

      A company which is looking for issuance of shares through IPO/FPO may require to increase the authorised capital for an additional infusion of funds from public shareholders.

    • Enhances borrowing capacity

      An increase in share capital shall result in increase of net worth of a business. Generally, lenders scrutinize business’s net worth to determine financially position of a company. This further enhances the borrowing capacity of the business.

    Minimum Requirements for Increasing Authorized Capital

    • Authorisation by Articles of Association (AOA)

    • Board of Director’s Approval

    • Shareholder’s Approval

    • DSC of Authorised Person

    • Payment of applicable Stamp Duty Payment

    What is included in our package?

    • Consultation on the process of Increasing the Authorised Capital

    • Verification of documents

    • Documentation for Increasing the Authorised Capital

    • Filing of Form SH-07 and MGT 14 (wherever applicable) with the Registrar of Companies (ROC)

    • Liaisoning between ROC and other Regulators

    Procedure for Increase of Authorized Capital

    • Collection of required Information and Documents

      In the first step, we will collect the required information and documents as per the checklist. After verifying and confirming the provided documents and information, we will proceed to the next step.

    • Preparation of Documents

      Once we have received all the required information and documents, we will prepare the necessary documents, such as notices, resolutions, altered MOA/AOA, etc., on behalf of the applicant.

    • Submission of Forms with ROC

      The directors shall duly sign the documents prepared for increasing the authorized capital, and then they will file them with ROC along with appropriate government fees and stamp duty.

    • Get Approval

      ROC shall check and verify the submitted documents and grant approval. Subsequently, ROC will send an intimation of approval via email to the applicant.

    Documents Required for Increase of Authorized Capital

    • Certificate of Incorporation

    • Memorandum of Association (MOA) and Articles of Association (AOA) of Company

    • Existing Shareholders list or Copy of Shareholder Register

    • Digital Signature Certificate (DSC) of Directors

    • Any other documents as may be required

    FAQ

    What is Authorised capital?2021-11-03T13:22:19+05:30

    Authorised share capital is the maximum amount of share capital that a company can issue to its shareholders. The authorised share capital amount is mentioned in the Memorandum of Association (MOA) of the company.

    How much time is required for increasing the authorised capital?2021-11-03T13:21:54+05:30

    The increase of authorised capital transfer process takes approximately 7-10 days based on the availability of the required documents and information, subject to government approval.

    Do I need to be physically present during the filing process?2021-11-03T13:21:08+05:30

    No, all the required forms and returns are filed electronically, so you would not need to be physically present at all for filing purposes.

    Is there any stamp duty to be paid on the increase of authorised capital?2021-11-03T13:20:27+05:30

    Yes, stamp duty at the applicable rate (vary from state to state) has to be paid on the component of increase of authorised capital.

    Is shareholder’s consent required for the increase of authorised capital?2021-11-03T13:19:26+05:30

    Yes, the shareholder’s consent by way of ordinary resolution (if authorised by AOA) is required for the increase of authorised capital.

    What is the due date for filing Form SH-7?2021-11-03T13:18:20+05:30

    The Company must file Form SH-7 within 30 days from the date of passing resolution.

    What is the paid-up capital of the company?2021-11-03T13:17:50+05:30

    Paid-up capital is the actual amount of money that has been received from shareholders of the company.

    Do I need to change the MOA at the time of increase of Authorised Capital?2021-11-03T13:15:54+05:30

    Yes, altered MOA has to be submitted at the time of increase of Authorised Capital while filing Form SH 7.

    What if my company’s Articles of Association (AOA) does not have the necessary powers to increase the authorised share capital?2021-11-03T13:15:13+05:30

    If your Company’s Articles of Association (AOA) does not have the necessary powers to increase the authorised share capital, then the AOA has to be amended to provide for provision relating to the increase of its share capital by passing a special resolution.

    Is it required to file Form MGT-14 for an increase of authorised capital?2021-11-03T13:14:48+05:30

    In case, authorised capital is increased by way of alteration in Articles of Association (AOA), then a special resolution passed shall be filed in Form MGT-14.

    Can Registration Arena help me in increasing authorised capital?2021-11-03T13:14:19+05:30

    Yes, we can provide you with a complete package for increasing the authorised capital of the company as well as other Compliance services

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