“Capital is the backbone of every business” – The quote digs into the importance of capit...
The authorized share capital of the company is the maximum amount of capital which can be raised by the company through the issue of the shares to its shareholders and the company can raise capital up to this amount only. It is mentioned in the memorandum of association of the company.
In the case of a company requiring additional capital for expansion and to meet working capital requirements, then authorized capital can be increased by issuing new shares.
For the increase in authorized share capital, it is required to obtain the approval of the registrar of companies by filing requisite forms.
The increase in the authorized share capital of the company is governed by the provisions of section 61 read with section 13 and 64 of the Companies Act 2013. The procedure is as under:
The article of association of the company must contain the provisions regarding authorizing it to increase its authorized share capital. If there is no such provision in the article, then the company is required to alter its article of association as per the provision of section 14 of the Companies Act, 2013.
Notice of the board meeting shall be given to all the board of directors as per the provision of section 173(3) of the Companies Act 2013. For the purpose of convening the board meeting the agenda would be:
The notice of the Extra Ordinary General Meeting (EGM) will be issued to all the shareholders, directors and auditors of the company as per the provision of section 101 of the Companies Act 2013.
To hold the Extra Ordinary General Meeting of the company on the date decided and pass the necessary special resolution for an increase in the authorized share capital of the company.
Form MGT-14 is required to be filed within 30 days of passing the resolution in the general meeting and;
From SH-7 is required to be filed within 30days of passing the resolution in the general meeting with the concerned registrar of companies with the necessary fees along with the necessary attachments:
The concerned registrar of the company shall verify all necessary documents and E- Form and approve the increase in the authorized share capital of the company.
From above it is clear that a company can expand its business to the level of authorised capital. In case you are looking to expand your business by infusion of more funds, increase your authorized share capital. For more information on provisions of Companies Act, 2013 you are advised to go through our blogs on Enterslice website.