Increase Authorized Capital
Authorized capital, also known as nominal capital or registered capital, is the maximum amount of share capital that a company is authorized to issue to its shareholders as per itsMemorandum of Associ
Get Free Consultation
What is Authorized Capital?
<p>Authorized capital, also known as nominal capital or registered capital, is the maximum amount of share capital that a company is authorized to issue to its shareholders as per itsMemorandum of Association (MoA).</p>
<p>It is the upper limit of capital a company can raise through the issuance of shares without amending its MoA. To issue shares beyond the authorized capital, the company must amend its MoA and file Form SH-7 with theRegistrar of Companies (ROC).</p>
<p>Share capital is classified based on how much has been offered to investors and how much has been paid. The main types are:</p>
<p>The authorized capital is defined in the capital clause of the companys MoA, which acts as its constitution. This clause:</p>
<p>Any change to authorized capital requires:</p>
<p>Keep in mind:This change can also affect your companys registration fees and stamp duty during incorporation.</p>
<p>Note:Theres no fixed legal limit for private companies; although Nidhi Companies are required to have Rs. 10 lakhs paid-up capital within a year as per Nidhi Rules, 2014.</p>
<p>Understanding different types of capital helps in knowing how companies raise and manage funds. Heres the quick comparison between types of capital:</p>
Eligibility Criteria
All registered entities requiring compliance services
Documents Required
Registration Process
Step 1: Checking the Articles of Association (AoA)
The first step involves a thorough examination of the companys AoA. It must contain a specific clause permitting the company to increase its authorized share capital. What to Do if Your AoA Does Not Have the Provision? If theAoAlacks such an enabling provision, the company must first alter its Articles of Association. This alteration involves: Prior Amendment:The AoA must be amended to include the power to increase authorized capital.Special Resolution:This specific alteration requires a special resolution passed by shareholders (at least 75% approval).Form MGT-14:Following the special resolution, e-FormMGT-14must be filed with the ROC within 30 days.
Step 2: Conducting a Board Meeting
Once the AoA is in order, the companys Board of Directors convenes a formal board meeting. In this meeting, the board finalizes the amount of the proposed increase. Board Resolution:The board passes a resolution approving the proposal to increase the authorized capital.EGM Scheduling:The board also sets the date, time, and venue for anExtraordinary General Meeting (EGM)of shareholders, where the resolution for capital increase will be presented. This is the board resolution for an increase in authorized capital.Notice Approval:The board also approves the draft notice for the EGM and the explanatory statement. A sample board resolution for increasing authorized capital is often used as a template.
Step 3: Calling an Extraordinary General Meeting (EGM)
Following the board meeting, notices for the EGM must be dispatched to all registered shareholders, directors, and auditors. This step ensures all relevant parties are informed and can participate. Issuance of Notice:Formal notices detailing the meeting agenda are sent out.Notice Period Compliance:These notices must adhere strictly to the prescribed notice period (typically 21 clear days).Clear Agenda:The notice should explicitly state the purpose of the meeting, including the specific proposal to increase the authorized capital.
Step 4: Passing the Ordinary Resolution in the EGM
At the EGM, shareholders will discuss the plan to increase the authorized share capital. For this change, shareholders need to pass an ordinary resolution, which means more than half of the votes cast by those present and voting must agree. Shareholder Discussion:Shareholders will review the proposal and all related details.Ordinary Resolution Requirement:This means a simple majority (over 50%) of votes cast by shareholders present and voting must be in favor. This resolution for an increase in authorized share capital is central to the process. Note:As per Section 61 of the Companies Act, 2013, increasing authorized capital usually requires a special resolution if the Articles of Association demand it. Otherwise, an ordinary resolution is sufficient, along with updating the Memorandum of Association.
Step 5: Filing Forms with the ROC
Following the successful passing of the resolution at the EGM, the company has a statutory obligation to file the necessary forms with the ROC. This crucial step officially registers the increase in authorized capital, making the alteration of share capital legally recognized. Mandatory Filing: Required forms must be submitted to the ROC.Official Registration: This action legalizes the change in the companys authorized capital.Timeline: These forms typically need to be filed within 30 days of passing the resolution.
Fees & Charges
| Fee Component | Amount |
|---|---|
| Up to 1,00,000 | INR 200 per application (minimum) |
| Above 1,00,000 to 5,00,000 | INR 200 per 10,000 or part thereof |
| Above 5,00,000 to 50,00,000 | INR 200 per 10,000 or part thereof on the first 5,00,000and INR 100 per 10,000 or part thereof on the next 45,00,000 |
| Above 50,00,000 to 1,00,00,000 | INR 200 per 10,000 or part thereof on the first 5,00,000INR 100 per 10,000 or part thereof on the next 45,00,000and INR 50 per 10,000 or part thereof on the next 50,00,000 |
| Above 1,00,00,000 | INR 200 per 10,000 or part thereof on the first 5,00,000INR 100 per 10,000 or part thereof on the next 45,00,000INR 50 per 10,000 or part thereof on the next 50,00,000and INR 25 per 10,000 or part thereof on the remainder |
Key Advantages
Expert Professional Guidance
Get end-to-end support from Your Professionals for seamless compliance.
Frequently Asked Questions
Why Choose Us?
Expert Professionals Team
Qualified Chartered Accountants and Company Secretaries handle your filing.
Fast Processing
Quick turnaround with dedicated support at every step.
Transparent Pricing
No hidden charges. Know exactly what you pay for.
100% Data Security
Your documents and data are encrypted and confidential.
Trusted by Thousands
Thousands of businesses registered successfully.
24/7 Support
Dedicated relationship manager and customer support.