Increase in Authorized Share Capital

Ashish M. Shaji

05 Sep, 2022

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.

Procedure to increase Authorized Share Capital

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:

• Authorization in Article of Association

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.

• Board Meeting

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^[1]. For the purpose of convening the board meeting the agenda would be:

1. Approval of the directors for increase in authorized share capital;
2. Fix day, date, time and venue of holding an Extra Ordinary General Meeting (EGM) of the company for taking the approval of members by passing a resolution for change in the clause of authorized share capital in a memorandum of association of the company as per the section 61 of the Companies Act 2013.
3. To approve the notice of the extra ordinary general meeting (EGM) with the explanatory statement annexed with the notice as per the provisions of section 102(1) of the companies act 2013.
4. Authorize one person either director of the company or company secretary to issue the notice of the general meeting;

• Notice of EGM

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.

• General Meeting

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.

• File Form with the ROC

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:

1. Copy of the Notice of EGM with the explanatory statement;
2. Copy of the resolution passed at the general meeting of the members;
3. Copy of Altered Memorandum of Association.

• Verification

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.

Conclusion

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.

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