Increase in Authorized Share Capital

Increase in Authorized Share Capital

Authorised Share Capital is also known as the nominal share capital which is the amount of capital which is considered in the Memorandum of Association of the Company. Such authorised capital would be the maximum amount of share capital which is considered by the company.

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  • Procedure for Increase in Authorised Share Capital
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Increase in Authorized Share Capital

Increase in Authorised Share Capital- An Overview

An increase in authorised share capital would include the overall adding of more capital to the company. There is a formal process and procedure to carry out the Increase in Authorised Share Capital.

The increase of Authorised Share capital is governed by the provisions of the Companies Act, 2013. Based on the amount of share capital of the company, the business can expand as per these requirements.

Statutory Definition of Increase of Authorised Share Capital

The definition of authorised share capital is present under the provisions of the Companies Act, 2013. As per section 2(8) of the Companies Act, 2013 the authorised share capital is also known as the nominal amount of share capital of the company. Such capital is the maximum amount of share capital which is authorised by the company.

There is a specific procedure to be considered under the Companies Act, 2013 for the increase in authorised share capital of the company. Hence a company can increase the amount of business based on the amount of authorised share capital with the company.

If the business of the company has to be increased, then there is a requirement of more funds for carrying out the process. Hence there is a specific procedure to carry out such process for the increase in authorised share capital.

Benefits of Increase of Authorised Share Capital

The following are the benefits of increase in authorised share capital:

Benefits of Increase of Authorised Share Capital enterslice
  • Expand Business
  • Diversify Operations
  • Compliance with Law
  • Expand Business

    With the increase of authorised share capital; the company can expand its business operations. Such requirements have to be carried out by the company in order to achieve its goals and operations.

  • Diversify Operations

    Operations of a business can be diversified by an increase in authorised share capital. Without any form of increase in authorised share capital, the business would not be able to diversify its operations.

  • Compliance with Law

    By following proper procedure the business would be compliant with the relevant provisions related to law.

Procedure for Increase in Authorised Share Capital

There is a proper procedure for increase in authorised share capital. Such procedure has to be compliant with the relevant provisions of the Companies Act, 2013. The following procedure has to be utilised for increase in authorised share capital:

  • Articles of Association (AOA) must have governing norms for authorisation
  • Board Meeting
  • Convene an Extraordinary General Meeting (EGM)
  • Alter the Memorandum of Association
  • Articles of Association (AOA) must have governing norms for authorisation

    First and foremost; the company has to check if the provisions relating to increase in authorised share capital is present in the AOA. Such provision is present under section 61 of the Companies Act, 2013. As per 61(1) of the Companies Act, 2013 a private limited company would increase the authorised share capital, if it thinks that the business of the company has to diversify. If such provision is not present in the AOA, then the AOA has to be altered as per section 14 of the Companies Act, 2013. For the alteration of the articles of association a separate procedure has to be utilised and followed.

  • Board Meeting

    In the next step, the company has to provide notice to convene a board meeting. A special day would be considered to convene the board meeting. In the board meeting, the resolution for alteration of articles (AOA) must be considered. If the provision for authorised share capital is present in the AOA, then the company would only have to take a resolution for carrying out the same. The following agendas must be considered in the board meeting:

    a. Take a decision related to the increase of authorised share capital of the company with the consent of the shareholders.

    b. In the next step, the directors would have to call and fix a day for the Extra-Ordinary General Meeting. In such meeting the shareholders would approve the same for the increase in authorised share capital. Such notice has to be provided 21 days before having the general meeting along with the explanatory statement as per section 102 of the Companies Act, 2013.

    c. Approve the notice which is considered in the EGM and provide the same with a note to all the members, directors and concerned individuals. Along with this Form-MGT 14 has to be filed with the respective authority regarding the increase in authorised share capital.

    d. In the next step, the authority to provide such notice would be authorised by the director or a company secretary.

  • Convene an Extraordinary General Meeting (EGM)

    In the next step, the members must call for the extraordinary general meeting and pass the special resolution of increase in authorised share capital of the business.

  • Alter the Memorandum of Association

    In the next step, the company has to carry out the procedure related to alteration of the MOA.

Post Compliance Steps for Increase in Authorised Share Capital

Filing Form SH-7- The limited company has to file form SH-7 with the ROC (Registrar of Companies) within 30 days of such alteration.

Along with the above, the following has to be provided:

  • Copy of the Board Resolution of the Company
  • Copy of the EGM Resolution
  • Copy of the Notice of the Extraordinary General Meeting along with the Explanatory Statement
  • Copy of the Altered MOA

Documents for Increase in Authorised Share Capital

The following documents have to be submitted for increase in authorised share capital:

  • Resolution – Board Resolution and Resolution of the General Meeting
  • Copy of the Amended Articles of Association
  • Copy of the Memorandum of Association
  • Copy of the Explanatory Statement
  • Copy of the Board Resolution of the Company
  • Copy of the EGM Resolution
  • Copy of the Notice of the Extraordinary General Meeting along with the Explanatory Statement
  • Copy of the Altered MOA
  • Form SH-7

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Frequently Asked Questions

Increase in authorised share capital is the process in which a company or organisation carries out procedures to increase the share capital.

Increase in authorised share capital is required for the business to carry out diversification and other activities.

The provisions for the increase in authorised share capital can be checked in the articles of association of the company.

If the provisions related to increase in authorised share capital is not present in the AOA then the company would have to take a special resolution for carrying out the same.

If the provision related to the increase in authorised sharre ccapital is present in the AOA, then the company would have to just carry out the procedure for the increase of authorised share capital.

The respective consent of the share holders is required for increase in authorised share capital of the company.

Form SH-7 is utilised for the increase in authorised share capital of a business.

To consider the authorised share capital of the company, the main requirement of the amount of share capital provided to the shareholders would be considered.

The minimum authorised share capital of a company is Rs. 1 Lakh.

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